Asked by Johnny Gomez on Jul 12, 2024
Verified
Refer to Figure 8-13. As the size of the tax increases from $3 to $6 to $9, what happens to tax revenues?
Tax Revenues
Tax revenues are the income that governments collect from individuals, corporations, sales, and other sources, used to fund public services and operations.
Tax Increases
Government actions that raise the amount of taxes levied on individuals, businesses, or transactions, affecting income, purchasing power, and investment.
- Appraise the influences of various tax rates on market activities, governmental finances, and reduction in economic welfare.
- Understand the Laffer curve and its implications for tax policy and government revenue.
Verified Answer
JR
juliet rosasJul 15, 2024
Final Answer :
When the tax is $3, tax revenue is $3 x 60 = $180. When the tax is $6, tax revenue is $6 x 40 = $240. When the tax is $9, tax revenue is $9 x 20 = $180. So tax revenue first increases, then decreases as the size of the tax increases.
Learning Objectives
- Appraise the influences of various tax rates on market activities, governmental finances, and reduction in economic welfare.
- Understand the Laffer curve and its implications for tax policy and government revenue.