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Suppose that Anna faces a marginal income tax rate of 35 percent, and if she cheats on her taxes, there is a 2 percent chance
Suppose that Anna faces a marginal income tax rate of 35 percent, and if she cheats on her taxes, there is a 2 percent chance that she will be caught. Suppose also that the marginal penalty of tax evasion is 10I, where I is the amount of unreported income (in thousands of euros). How much income will Anna fail to report?
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