The Lager curve y = HQ} proposes a simple theoretical relationship between a government's tax revenue RH} and tax rate t: Hm = the}, where
The Lager curve y = HQ} proposes a simple theoretical relationship between a government's tax revenue RH} and tax rate t: Hm = the}, where t} is the tax base for tax rate t that is, the total dollar amount of economic activity taxable at tax rate t. The dependence of Mt} on t comes from things like changes in people's spending habits or companies1 investment plans based on the tax rate. Because i represents a tax rate, it is restricted to be in the interval [[1,1]. {For example, if you have a tax base of $21] billion and a tax rate of %, $5 billion goes to the government through taxes, and $15 billion remains with the economic actors.) In this assignment, you may use without proof the assumption that Mt} is continuous on the interval [ll], 1] and differentiable on the interval {0,1}. You may also look up terms and arguments online, though it is certainly possible to get full marks on the assignment without doing so. 2. (a) In a paragraph, explain why it is plausible that h'} <: on the interval scenario do you think is more plausible: that wilt or it :13- d justify your answer in one two paragaphs. may assume if c: interval. remainder of this assignment h s: u and b find rm a paragraph explain why plausible ru u. determine concavity re draw sketch y="RE]">
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