A Local Government Currently Has a Tax Base of $4

Multiple Choice

A local government currently has a tax base of $4 million and a tax rate of 5 percent. If the tax rate is increased to 6 percent, the tax base will decrease to $3.5 million. If the goal is to maximize tax revenues the tax rate should be

A) lowered below 5 percent.
B) kept at 5 percent.
C) raised to 6 percent.
D) abolished.