28 DEADWEIGHT LOSS AND TAX REVENUE AS TAXES VARY Tax revenue = tax rate × quantity bought and sold –TR = T × Q T↑ causes Q↓ Therefore, the effect of T↑ on TR is ambiguous T↑ causes TR↑ when the tax rate (T) is low T↑ causes TR↓ when the tax rate (T) is high This gives us the Laffer Curve
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