According to Arthur Laffer,the graph that represents the amount of tax revenue (measured on the vertical axis)as a function of the size of the tax (measured on the horizontal axis)looks like
A)a U.
B)an upside-down U.
C)a horizontal straight line.
D)an upward-sloping line or curve.

Question

Quizplus · Accepted Answer

According to Arthur Laffer's theory of supply-side economics, the graph of tax revenue as a function of tax rates follows an upside-down U shape, known as the Laffer curve. At very low tax rates, increasing taxes can lead to increased revenue. However, at some point, further increases in taxes lead to a decline in revenue because they create disincentives to work, invest, and innovate, thus reducing the tax base. The optimal tax rate that maximizes revenue is somewhere in the middle of the curve.

According to Arthur Laffer,the Graph That Represents the Amount of Tax