WGU D089 PRINCIPLES OF ECONOMICS –
COMPREHENSIVE FINAL EXAM REVIEW: 200 QUESTIONS
WITH CORRECT ANSWERS AND RATIONALES
1. Which branch of economics deals with the performance, structure,
behavior, and decision-making of an economy as a whole rather than
individual markets?
A) Microeconomics
B) Positive Economics
C) Macroeconomics
D) Normative Economics
E) Econometrics
Correct Answer: C) Macroeconomics
Rationale: Macroeconomics focuses on aggregate indicators such as
GDP, unemployment rates, and price indices to understand how the
whole economy functions.
2. What is the fundamental economic problem that results from the
gap between limited resources and theoretically limitless wants?
A) Opportunity Cost
B) Inflation
C) Marginal Benefit
D) Scarcity
E) Equilibrium
Correct Answer: D) Scarcity
Rationale: Scarcity is the core conflict in economics because resources
,are finite but human desires are infinite, forcing societies to make
choices.
3. A student chooses to spend two hours studying for an exam instead
of going to the movies. The value of the movie and the enjoyment
associated with it represents the student’s:
A) Marginal Benefit
B) Opportunity Cost
C) Sunk Cost
D) Economic Profit
E) Comparative Advantage
Correct Answer: B) Opportunity Cost
Rationale: Opportunity cost is the value of the next best alternative
given up when a choice is made.
4. Which concept describes the incremental increase in benefit to a
consumer caused by the consumption of one additional unit of a
good?
A) Marginal Cost
B) Total Utility
C) Marginal Benefit
D) Opportunity Cost
E) Scarcity
Correct Answer: C) Marginal Benefit
Rationale: Marginal benefit refers to the additional satisfaction or utility
a consumer receives from consuming one more unit of a good or
service.
5. According to the Principles of Economics, why do rational people
"think at the margin"?
,A) Because they ignore all costs
B) Because they want to maximize total cost
C) Because they make decisions based on small incremental
adjustments to an existing plan
D) Because they only care about the very first unit consumed
E) Because they do not respond to incentives
Correct Answer: C) Because they make decisions based on small
incremental adjustments to an existing plan
Rationale: Thinking at the margin involves comparing the additional
(marginal) benefits of an action to the additional (marginal) costs.
6. Which economic principle states that a nation's standard of living
depends on its ability to produce goods and services?
A) Principle #1: People face trade-offs
B) Principle #5: Trade can benefit everyone
C) Principle #8: A nation's standard of living depends on its ability to
produce
D) Principle #9: Prices rise when the government prints too much
money
E) Principle #10: Society faces a short-run trade-off between inflation
and unemployment
Correct Answer: C) Principle #8: A nation's standard of living depends
on its ability to produce
Rationale: Productivity is the primary determinant of living standards.
7. What is the most common cause of inflation according to economic
principles?
A) Increased competition
B) A decrease in the money supply
C) High unemployment
, D) The government printing too much money
E) A decrease in consumer demand
Correct Answer: D) The government printing too much money
Rationale: When a government creates large quantities of the nation's
money, the value of the money falls, leading to a rise in the price level
of goods.
8. Which of the following describes the short-run trade-off between
inflation and unemployment?
A) Higher inflation always leads to higher unemployment
B) Lowering inflation often causes a temporary rise in unemployment
C) There is no relationship between the two
D) Printing money reduces both inflation and unemployment
E) Increasing unemployment always lowers the money supply
Correct Answer: B) Lowering inflation often causes a temporary rise in
unemployment
Rationale: In the short run, reducing inflation often involves a
contraction that increases unemployment temporarily.
9. In which type of economic system do customs, history, and time-
honored beliefs guide economic decisions?
A) Command Economy
B) Market Economy
C) Mixed Economy
D) Traditional Economy
E) Capitalist Economy
Correct Answer: D) Traditional Economy
Rationale: Traditional economies rely on habit and ritual for economic
decisions.
COMPREHENSIVE FINAL EXAM REVIEW: 200 QUESTIONS
WITH CORRECT ANSWERS AND RATIONALES
1. Which branch of economics deals with the performance, structure,
behavior, and decision-making of an economy as a whole rather than
individual markets?
A) Microeconomics
B) Positive Economics
C) Macroeconomics
D) Normative Economics
E) Econometrics
Correct Answer: C) Macroeconomics
Rationale: Macroeconomics focuses on aggregate indicators such as
GDP, unemployment rates, and price indices to understand how the
whole economy functions.
2. What is the fundamental economic problem that results from the
gap between limited resources and theoretically limitless wants?
A) Opportunity Cost
B) Inflation
C) Marginal Benefit
D) Scarcity
E) Equilibrium
Correct Answer: D) Scarcity
Rationale: Scarcity is the core conflict in economics because resources
,are finite but human desires are infinite, forcing societies to make
choices.
3. A student chooses to spend two hours studying for an exam instead
of going to the movies. The value of the movie and the enjoyment
associated with it represents the student’s:
A) Marginal Benefit
B) Opportunity Cost
C) Sunk Cost
D) Economic Profit
E) Comparative Advantage
Correct Answer: B) Opportunity Cost
Rationale: Opportunity cost is the value of the next best alternative
given up when a choice is made.
4. Which concept describes the incremental increase in benefit to a
consumer caused by the consumption of one additional unit of a
good?
A) Marginal Cost
B) Total Utility
C) Marginal Benefit
D) Opportunity Cost
E) Scarcity
Correct Answer: C) Marginal Benefit
Rationale: Marginal benefit refers to the additional satisfaction or utility
a consumer receives from consuming one more unit of a good or
service.
5. According to the Principles of Economics, why do rational people
"think at the margin"?
,A) Because they ignore all costs
B) Because they want to maximize total cost
C) Because they make decisions based on small incremental
adjustments to an existing plan
D) Because they only care about the very first unit consumed
E) Because they do not respond to incentives
Correct Answer: C) Because they make decisions based on small
incremental adjustments to an existing plan
Rationale: Thinking at the margin involves comparing the additional
(marginal) benefits of an action to the additional (marginal) costs.
6. Which economic principle states that a nation's standard of living
depends on its ability to produce goods and services?
A) Principle #1: People face trade-offs
B) Principle #5: Trade can benefit everyone
C) Principle #8: A nation's standard of living depends on its ability to
produce
D) Principle #9: Prices rise when the government prints too much
money
E) Principle #10: Society faces a short-run trade-off between inflation
and unemployment
Correct Answer: C) Principle #8: A nation's standard of living depends
on its ability to produce
Rationale: Productivity is the primary determinant of living standards.
7. What is the most common cause of inflation according to economic
principles?
A) Increased competition
B) A decrease in the money supply
C) High unemployment
, D) The government printing too much money
E) A decrease in consumer demand
Correct Answer: D) The government printing too much money
Rationale: When a government creates large quantities of the nation's
money, the value of the money falls, leading to a rise in the price level
of goods.
8. Which of the following describes the short-run trade-off between
inflation and unemployment?
A) Higher inflation always leads to higher unemployment
B) Lowering inflation often causes a temporary rise in unemployment
C) There is no relationship between the two
D) Printing money reduces both inflation and unemployment
E) Increasing unemployment always lowers the money supply
Correct Answer: B) Lowering inflation often causes a temporary rise in
unemployment
Rationale: In the short run, reducing inflation often involves a
contraction that increases unemployment temporarily.
9. In which type of economic system do customs, history, and time-
honored beliefs guide economic decisions?
A) Command Economy
B) Market Economy
C) Mixed Economy
D) Traditional Economy
E) Capitalist Economy
Correct Answer: D) Traditional Economy
Rationale: Traditional economies rely on habit and ritual for economic
decisions.
