2. In the kingdom of Rachmaninoff, GDP is currently $900 billion. Production in Rachmaninoff is unaffected by changes in tax rates until the rate hits 20 percent. Thereafter, for each 10 percent increase in the tax rate, GDP drops by $80 billion. a. Complete the table for the government of Rachmaninoff. Instructions: Leave no cells blank - be certain to enter "0" wherever required. % Tax Rate 0 10 20 30 40 50 60 70 80 90 100 GDP $900 Tax revenue would be maximized at Amount of tax revenue: $_ c. Draw the Laffer Curve for your answers in part 'b'. $ b. At what tax rate will the tax revenue be maximized? What will be the amount of tax revenue? % Tax Revenue

2. In the kingdom of Rachmaninoff, GDP is currently $900 billion. Production in Rachmaninoff is unaffected by changes in tax rates until the rate hits 20 percent. Thereafter, for each 10 percent increase in the tax rate, GDP drops by $80 billion. a. Complete the table for the government of Rachmaninoff. Instructions: Leave no cells blank - be certain to enter "0" wherever required. % Tax Rate 0 10 20 30 40 50 60 70 80 90 100 GDP $900 Tax revenue would be maximized at Amount of tax revenue: $_ c. Draw the Laffer Curve for your answers in part 'b'. $ b. At what tax rate will the tax revenue be maximized? What will be the amount of tax revenue? % Tax Revenue

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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