91. The deadweight loss associated with a tax on a commodity is generated by a. those consumers who still choose to consume the commodity but pay a higher price that reflects the tax. b. those consumers who choose to not consume the commodity that is taxed. c. all citizens who are able to use services provided by government. d. those consumers who are unable to avoid paying the tax. 92. When taxes are imposed on a commodity a. there is never a deadweight loss. b. some consumers alter their consumption by not purchasing the taxed commodity. c. tax revenue will rise by the amount of the tax multiplied by the before-tax level of consumption. d. these taxes are considered nondistortionary. 93. The U.S. income tax a. discourages saving. b. encourages saving. c. has no effect on saving. d. will reduce the administrative burden of taxation. 94. When interest income from savings is taxed a. more will be saved to make up for what is lost in taxes. b. the same amount as without the tax. c. less will be saved. d. None of the above are correct since the government would not tax interest on savings. 95. A consumption tax is a tax on only a. goods and not services. b. the amount of income that people spend. c. the amount of income that people earn. d. the amount of income that people save. 96. An advantage of a consumption tax over the present tax system is that a consumption tax a. is much harder for taxpayers to cheat. b. would save the government millions in administrative costs. c. places more of the tax burden on the wealthy. d. does not discourage saving. 97. Which of the following would NOT cause our current tax system to resemble a consumption tax? a. Individual Retirement Accounts b. Keogh plans c. 401(K) plans d. money market accounts 98. When a taxpayer attempts to legally reduce her tax liability she is engaging in a. tax avoidance. b. tax evasion. c. a tax return compensation plan. d. activities outside the intent of tax law. 99. Tax avoidance a. and tax evasion are both legal. b. and tax evasion are both illegal. c. is legal and tax evasion is illegal. d. is illegal and tax evasion is legal. 100. In the absence of taxes Janet would prefer to purchase a large sport utility vehicle (SUV). However the government has recently decided to place a $10 000 nuisance tax on SUVs. Which of the following statements best reflects the effect of this tax if Jane decides to purchase a small economy car as a result of the tax? a. Other people who choose to purchase SUVs will incur the cost of the deadweight loss of the tax. b. There are no deadweight losses as long as some people still choose to purchase SUVs. c. All deadweight losses are mitigated if there is a net decrease in air pollution. d. Janet is worse off and her loss of welfare is part of the deadweight loss of the tax.
