When Ronald Reagan was running for president in 1979, an economist named Arthur Laffer approached him with
Question:
When Ronald Reagan was running for president in 1979, an economist named Arthur Laffer approached him with an idea to increase tax revenues to the federal government while lowering tax rates.
(a) Laffer suggested there is a revenue function R = R(t), where R is tax revenue and t is the tax rate (as a percent), 0 ≤ t ≤ 100. What is R (0) ? What is R (100)? Why?
(b) At the time Reagan was running for office the highest marginal tax rate was 70%. Draw a continuous function, R = R(t), on the interval [0, 100]. Be sure your graph supports Laffer’s position that federal tax revenue can increase with a decrease in the highest marginal tax rate.
(c) What theorem from this section is being utilized?
Step by Step Answer:
Precalculus Concepts Through Functions A Unit Circle Approach To Trigonometry
ISBN: 9780137945139
5th Edition
Authors: Michael Sullivan