Recall that tax revenue is ππ€π»π
Recall that tax revenue is ππ€π»π. The Laffer curve is tax revenue as
a function of the tax rate and only exogenous variables and parameters. Use the expression you derived (π»=(1βπ)^(π/(π+1)π^(βπ/(π+1)) as well as the labor demand curve (A = W) to derive an expression for tax revenue that is a function of only the tax rate π and exogenous variables (π΄,π) and parameters (π,π). Then find the top of the Laffer curve. In other words, derive an expression for the tax rate that yields maximum tax revenue as a function of the exogenous parameters (π,π).
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