Which of the Following Scenarios Is Consistent with the Laffer

question 32

Multiple Choice

Which of the following scenarios is consistent with the Laffer curve?

• A)The tax rate is 1 percent,and tax revenue is very low.
• B)The tax rate is 1 percent,and tax revenue is very high.
• C)The tax rate is 99 percent,and tax revenue is very high.
• D)The tax rate is moderate (between very high and very low),and tax revenue is very low.

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Definitions:

More Elastic

A term describing demand that is highly responsive to changes in price.

Quantity Demanded

The specific amount of a good or service consumers are willing to buy at a given price during a specific period.

Elasticity Coefficient

A numerical measure of the responsiveness of the quantity demanded or supplied of a good to a change in one of its determinants, like price.

Same Elasticity

A condition where two or more products have identical responsiveness in quantity demanded or supplied when there is a change in price.