The higher a country's tax rates,the more likely that country will be
A)at the top of the Laffer curve.
B)on the positively sloped part of the Laffer curve.
C)on the negatively sloped part of the Laffer curve.
D)experiencing small deadweight losses.

Question

Quizplus · Accepted Answer

The Laffer curve illustrates the relationship between tax rates and government revenue. As tax rates increase, there comes a point (the revenue-maximizing point) beyond which people's incentives to work and invest decrease, leading to a decrease in the government's overall revenue. The negatively sloped part of the Laffer curve represents this point, where further increases in tax rates lead to a decrease in government revenue. Therefore, a country with high tax rates is more likely to be on the negatively sloped part of the Laffer curve.

The Higher a Country's Tax Rates,the More Likely That Country