Which of the following is FALSE about a Laffer curve?

A) It illustrates the relationship between tax revenue and income tax rates

B) Its bell-shape is due to income effect and substitution effect

C) It is upward sloping if substitution effect is greater than income effect

D) It is upward sloping if income effect is greater substitution effect

E) None of above

Solutions

Expert Solution

Since the Laffer curve shows a theoretical relationship between rates of taxation and the resulting levels of government revenue.

It is bell shaped curve. When the tax rate increases, then tax revenue increases initially upto a point where curve is maximum. In this case the curve is upward sloping and here substitution effect dominates the income effects.

It means option D is false about the laffer curve.

D; It is upward sloping and here income effect dominates the substitution effects.

Rahul Sunny answered 1 year ago

Next > < Previous

Related Solutions

The Laffer Curve is ofen cited by economists and politicians. Research the Laffer Curve. Explain who Laffer...

The Laffer Curve is ofen cited by economists and politicians. Research the Laffer Curve. Explain who Laffer is, what the curve means, and comment on it's validity or lack thereof. Is it useful in a practical sense? How does it hold up to rigorous statistical analysis?

4. The Laffer curve Government-imposed taxes cause reductions in the activity that is being taxed, which...

4. The Laffer curveGovernment-imposed taxes cause reductions in the activity that is being taxed, which has important implications for revenue collections.To understand the effect of such a tax, consider the monthly market for rum, which is shown on the following graph.Use the graph input tool to help you answer the following questions. You will not be graded on any changes you make to this graph.Note: Once you enter a value in a white field, the graph and any corresponding amounts...

4. The Laffer curve Government-imposed taxes cause reductions in the activity that is being taxed, which...

4. The Laffer curveGovernment-imposed taxes cause reductions in the activity that is being taxed, which has important implications for revenue collections.To understand the effect of such a tax, consider the monthly market for vodka, which is shown on the following graph.Use the graph input tool to help you answer the following questions. You will not be graded on any changes you make to this graph.Note: Once you enter a value in a white field, the graph and any corresponding amounts...

Which of the following is false about the enzyme lysozyme?

Which of the following is false about the enzyme lysozyme?kills bacterial cellsbreaks down bacterial cell wallsdestroys viruses and fungiacts as a chemical barriercan be found in mucus, saliva, tears, and breast milk

Discuss the "Pros and Cons" of the Laffer Curve? Was Arthur Laffer's concept valued

Which of the following is true about the demand curve A demand curve shows the number...

Which of the following is true about the demand curve A demand curve shows the number of units the market will buy in a given time period at different prices that might be charged A demand curve indicates the cost per unit of output in the short run. A demand curve indicates the cost per unit of output in the long run In a monopoly, the demand curve does not indicate the total market demand resulting from different prices. A...

Which of the following statements is CORRECT about a yield curve?

Which of the following statements is CORRECT about a yield curve? a. A yield curve reflects the relationship between bond yields and the inflation rate. b. A humped yield curve reflects interest rates lower than short term maturities. c. A normal yield curve is generally humped. d. An upward sloping yield curve is referred to as abnormal or inverted. e. A downward sloping yield curve is referred to as abnormal or inverted

Which of the following statements about receptor potentials is FALSE?

Which of the following statements about receptor potentials is FALSE? A. They are changes in the resting membrane potential of a sensory cell in response to a stimulus. B. The receptor potential spreads from the cell body of a sensory cell to the axon hillock, where action potentials can be generated C. One receptor potential always prompts the release of a neurotransmitter that induces an associated neuron to generate an action potential. D. They must be converted into action potentials...

Which of the following statements about the nuclear envelope is FALSE?

Which of the following statements about the nuclear envelope is FALSE? A. It is composed of two membranes (a double membrane) B. Unlike other membranes in the cell, it primarily consists of complex polysacchrides such as cellulose C. It is supported by a cytoskeletal network known as nuclear lamina D. It contains pores for the passage of large molecules E. It contains the chromosomal DNA of eukaryotic cells

Which of the following is false about wavelengths of electromagnetic radiation

Which of the following is false about wavelengths of electromagnetic radiationa) Radiation with short wavelengths have high energies b) Energy does not depend on wavelength c) Radiation with long wavelengths have low energies d) Energy depends on wavelength

Subjects