Draw a curve relating the tax rate (from 0 to 100 percent) to the total tax revenues that are collected. Put the tax rate on the horizontal axis.

The curve should describe the following statement: “At a tax rate of zero, no taxes are collected. As the tax rate increases, total tax revenues rise. But once the tax rate becomes high enough, total tax revenues begin to fall as taxpayers take advantage of more loopholes in the tax law or work less because with taxes so high, the reward for working becomes too low. At a 100 percent tax rate, everyone evades taxes or leaves the country, so no tax revenues are collected.”