When a Country Is on the Downward-Sloping Side of the Laffer

question 139

Multiple Choice

When a country is on the downward-sloping side of the Laffer curves, a cut in the tax rate will

• A)decrease tax revenue and decrease the deadweight loss.
• B)decrease tax revenue and increase the deadweight loss.
• C)increase tax revenue and decrease the deadweight loss.
• D)increase tax revenue and increase the deadweight loss.

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Definitions:

Nash Equilibrium

A concept in game theory where no player can benefit by changing strategies if other players keep their strategies unchanged.

Payoff Matrix

A table that shows the potential outcomes of different decisions in a strategic situation, used in game theory to analyze choices and consequences.

Zero-Sum Game

A situation in game theory where one participant's gain or loss is exactly balanced by the losses or gains of the other participants.

Negative-Sum Game

In game theory, a game in which the gains (+) and losses (−) add up to some amount less than zero; one party’s losses exceed the other party’s gains. A strategic interaction (game) between two or more parties (players) in which the winners’ gains are less than the losers’ losses so that the gains and losses sum to a negative number.