Why do most economists believe that the Laffer argument does NOT apply to broad-based taxes?
What will be an ideal response?
Most economists believe that the supply of labor is not as sensitive to changes in tax rates as Laffer believed, so for broad-based taxes like income taxes and payroll taxes, cutting rates would simply reduce the revenues that the government collects.
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Refer to Figure 4.9. Payoffs for playing Solid and Dash are indicated by the appropriate lines in the figure. Answer the following questions based on the above figure:
a. If you were playing this game, what would you choose if you thought everyone was playing Solid? b. If you were playing this game, what would you choose if you thought everyone was playing Dash? c. What is the dominant strategy in this game? d. What is the equilibrium outcome in this game?
Refer to the diagram above, which represents a country's supply and demand for an internationally traded good. If PW is the world price, and a foreign country engages in dumping by selling at P2, total domestic consumption will ________ to ________
A) increase; Q2 B) decrease; zero C) increase; Q5 D) increase; Q3