# FINANCE

38. Holding all other forces constant, when the price of gasoline rises, the number of gallons of gasoline demanded would fall substantially over a ten year period because A) buyers tend to be much less sensitive to a change in price when given more time to react. B) buyers will have substantially more income over a ten year period. C) buyers tend to be much more sensitive to a change in price when given more time to react. D) None of these answers are correct. 39. Demand is unit elastic if A) elasticity is less than 1. B) elasticity is equal to 1. C) elasticity is greater than 1. D) elasticity is equal to 0. 40. If hot dogs are an inferior good, an increase in income will result in A) An increase in the quantity demanded for hot dogs. B) An increase in the demand for hot dogs. C) A decrease in the quantity demanded for hot dogs. D) A decrease in the demand for hot dogs. E) No change in the quantity demanded for hot dogs. 41. Which of the following statements best reflects the law of diminishing marginal utility? A) “I have to have a scoop of ice cream on my pie.” B) “I’ll never get tired of your cooking.” C) “The last bite tastes just as good as the first.” D) “I couldn’t eat another doughnut if you paid me.” E) “I prefer to eat several small meals a day, rather than three large ones.” 42. Brooke is spending all of her income consuming products X and Y. If MUX / PX = 10 and MUy / Py = 6, what should Brooke do to maximize her satisfaction? A) Buy more X and more Y. B) Buy more X and less Y. C) Buy less X and less Y. D) Buy less X and more Y. E) Make no changes 43. While eating at Alex’s “Pizza by the Slice” restaurant, Kara experiences diminishing marginal utility. She gained 10 units of satisfaction from her first slice of pizza consumed, and would only receive 5 units of satisfaction from consuming a second slice. Based on this information we can conclude that: A) Alex may have to lower the price to convince Kara to buy a second slice B) Kara will not eat a second slice, even if it is given to her at no charge. C) Kara will definitely want to buy a second slice of pizza. D) even if Kara buys a second slice, she will not buy a third slice.

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