Q. Identify the economic principle stating that both a zero and a 100% tax rate would result in zero revenue due to inadequate incentive to work?
Answer: Laffer curve
Notes: The principle is known as the Laffer curve, an economic theory displaying the correlation between tax rates and tax revenue. It posits an optimal tax rate for maximum revenue. Zero tax means no government revenue, and 100% tax deprives individuals of earning incentives, thereby also producing no revenue. This notion was galvanized by economist Arthur Laffer in the 1970s and is typically invoked to advocate for tax reductions to spark economic expansion.

This Question is Also Available in:

हिन्दी
Question Source: 📚This question has been sourced from GKToday's "40000+ GK / General Studies MCQs for SSC & State PCS Exams" App Exclusive Course in GKToday Android Application which provides more than 40K General Knowledge and General Studies questions with explanations asked in all Competitive Exams of India. Download the app here.
📌 Question Number: 14 in General Studies Mock Test - 13 in the above course in App.