The Laffer curve reflects the view that when
A. tax rates are too low, raising them creates a greater incentive for suppliers to increase production.
B. tax rates are too high, lowering them not only creates greater incentive for suppliers to increase production, but also ends up generating higher tax revenues.
C. tax revenue is too low, the only way to increase it is through higher tax rates.
D. tax rates are too high, lowering them also reduces tax revenue.
Answer: B
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