The following graph shows the Laffer curve for several tax rates (20, 40, 50, 60, 80). Tax Revenue (Thousands of dollars) 560 480 400 320 240 160 80 0 10 10 20 30 40 50 Tax Rate (Percent) 60 70 80 90 100 Based on the graph, after the maximum revenue point, higher taxes lead to tax revenues, because the increase in tax revenue from the higher per-bottle tax is outweighed by the decrease in tax revenue due to the declining number of bottles sold.
The following graph shows the Laffer curve for several tax rates (20, 40, 50, 60, 80). Tax Revenue (Thousands of dollars) 560 480 400 320 240 160 80 0 10 10 20 30 40 50 Tax Rate (Percent) 60 70 80 90 100 Based on the graph, after the maximum revenue point, higher taxes lead to tax revenues, because the increase in tax revenue from the higher per-bottle tax is outweighed by the decrease in tax revenue due to the declining number of bottles sold.
Principles of Economics 2e
2nd Edition
ISBN:9781947172364
Author:Steven A. Greenlaw; David Shapiro
Publisher:Steven A. Greenlaw; David Shapiro
Chapter3: Demand And Supply
Section: Chapter Questions
Problem 53P: Table 3.8 shows information on the demand and supply for bicycles, where the quantities of bicycles...
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