Write a formula for tax revenues as a function of tax rate

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Question: In an economy the supply curve of labor, S, is given by

S = -100 + 200wn

where wn, is the after-tax wage rate. Assume that the before-tax wage rate is fixed at 10.

a. Write a formula for tax revenues as a function of the tax rate, and sketch the function in a diagram with the tax rate on the horizontal axis and tax revenues on the vertical axis. Suppose that the government currently imposes a tax rate of TO percent. What advice would you give it?

b. Try this problem if you know some calculus: At what tax rate are tax revenues maximized in this economy?

Reference no: EM131500272

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