WGU D089 Latest Exam: Principles of
Economics Q&A + Rationales
2027/2028
WGU D089 Principles of Economics – Full Practice Exam (150 Questions)
SECTION 1: THE ECONOMIC WAY OF THINKING (Questions 1–25)
1. Economics is best defined as the study of:
A) How to make money in the stock market
B) How individuals and societies allocate scarce resources to satisfy unlimited wants
C) How governments control the production of goods
D) How businesses maximize their profits
Correct Answer: B
Rationale: Economics is the social science that studies how individuals, businesses, and
societies make choices about the allocation of scarce resources to satisfy unlimited wants. It
is fundamentally about decision-making in the face of scarcity.
2. What are the three fundamental questions every economy must answer?
A) What, How, and For Whom
B) What, When, and Why
,C) How, When, and Where
D) What, Where, and For Whom
Correct Answer: A
Rationale: Every society must answer three basic economic questions: (1) What goods and
services should be produced? (2) How should they be produced? (3) For whom should they
be produced? "When" is not one of the core questions.
3. The fundamental economic problem faced by all societies is:
A) Inflation
B) Unemployment
C) Scarcity
D) Income inequality
Correct Answer: C
Rationale: Scarcity is the basic economic problem—the gap between limited, scarce
resources and theoretically limitless human wants. Because resources are limited while
wants are unlimited, choices must be made.
4. According to Mankiw's 10 Principles of Economics, what determines a nation's
standard of living?
A) The amount of money printed by the government
B) The ability to produce goods and services
C) The level of government spending
D) The rate of inflation
Correct Answer: B
Rationale: Principle #8 states that a country's standard of living depends on its ability to
produce goods and services. The more productive a society is, the better off its people are.
,5. Which of the following is an example of a normative economic statement?
A) The unemployment rate is currently 5.2%
B) The government should increase spending to reduce unemployment
C) Inflation is running at 2.1%
D) GDP grew by 3% last quarter
Correct Answer: B
Rationale: Normative economics deals with "what ought to be" and involves value-based
judgments and recommendations. "The government should..." is a prescriptive statement,
unlike the others which are objective descriptions of "what is" (positive economics).
6. What do economists mean when they say that people "think at the margin"?
A) They make decisions based on total costs and total benefits
B) They compare the additional benefits and additional costs of an action
C) They make decisions based on emotions
D) They ignore the costs of decisions
Correct Answer: B
Rationale: Thinking at the margin (Principle #3) means evaluating whether the additional
benefit (marginal benefit) of one more unit is worth the additional cost (marginal cost). It is
not an all-or-nothing decision, but rather a decision about incremental changes.
7. According to Mankiw's principles, how does trade between two parties affect
them?
A) Trade is a zero-sum game where one party must lose
B) Trade can benefit everyone by allowing for specialization
C) Trade always benefits one party at the expense of another
D) Trade eliminates scarcity
, Correct Answer: B
Rationale: Principle #5 states that trade can make everyone better off. Trade allows each
person to specialize in the activities they do best, whether it be farming, sewing, or home
building. By trading with others, people can buy a greater variety of goods and services at
lower cost.
8. The opportunity cost of a choice is:
A) The total cost of all options
B) The monetary cost of the option chosen
C) The value of the next best alternative given up
D) The cost of the resources used
Correct Answer: C
Rationale: Opportunity cost is the value of the next best alternative that must be given up
when a choice is made. It represents what you sacrifice to obtain something else.
9. Which of the following explains the Law of Increasing Opportunity Costs as
depicted by a Production Possibilities Frontier (PPF)?
A) The downward slope of the PPF
B) The upward slope of the PPF
C) The bowed-out (concave) shape of the PPF
D) The points outside the PPF
Correct Answer: C
Rationale: The bowed-out shape of the PPF reflects the law of increasing opportunity costs.
As production of one good increases, the opportunity cost of producing additional units of
that good rises because resources are not perfectly adaptable to producing both goods.
Economics Q&A + Rationales
2027/2028
WGU D089 Principles of Economics – Full Practice Exam (150 Questions)
SECTION 1: THE ECONOMIC WAY OF THINKING (Questions 1–25)
1. Economics is best defined as the study of:
A) How to make money in the stock market
B) How individuals and societies allocate scarce resources to satisfy unlimited wants
C) How governments control the production of goods
D) How businesses maximize their profits
Correct Answer: B
Rationale: Economics is the social science that studies how individuals, businesses, and
societies make choices about the allocation of scarce resources to satisfy unlimited wants. It
is fundamentally about decision-making in the face of scarcity.
2. What are the three fundamental questions every economy must answer?
A) What, How, and For Whom
B) What, When, and Why
,C) How, When, and Where
D) What, Where, and For Whom
Correct Answer: A
Rationale: Every society must answer three basic economic questions: (1) What goods and
services should be produced? (2) How should they be produced? (3) For whom should they
be produced? "When" is not one of the core questions.
3. The fundamental economic problem faced by all societies is:
A) Inflation
B) Unemployment
C) Scarcity
D) Income inequality
Correct Answer: C
Rationale: Scarcity is the basic economic problem—the gap between limited, scarce
resources and theoretically limitless human wants. Because resources are limited while
wants are unlimited, choices must be made.
4. According to Mankiw's 10 Principles of Economics, what determines a nation's
standard of living?
A) The amount of money printed by the government
B) The ability to produce goods and services
C) The level of government spending
D) The rate of inflation
Correct Answer: B
Rationale: Principle #8 states that a country's standard of living depends on its ability to
produce goods and services. The more productive a society is, the better off its people are.
,5. Which of the following is an example of a normative economic statement?
A) The unemployment rate is currently 5.2%
B) The government should increase spending to reduce unemployment
C) Inflation is running at 2.1%
D) GDP grew by 3% last quarter
Correct Answer: B
Rationale: Normative economics deals with "what ought to be" and involves value-based
judgments and recommendations. "The government should..." is a prescriptive statement,
unlike the others which are objective descriptions of "what is" (positive economics).
6. What do economists mean when they say that people "think at the margin"?
A) They make decisions based on total costs and total benefits
B) They compare the additional benefits and additional costs of an action
C) They make decisions based on emotions
D) They ignore the costs of decisions
Correct Answer: B
Rationale: Thinking at the margin (Principle #3) means evaluating whether the additional
benefit (marginal benefit) of one more unit is worth the additional cost (marginal cost). It is
not an all-or-nothing decision, but rather a decision about incremental changes.
7. According to Mankiw's principles, how does trade between two parties affect
them?
A) Trade is a zero-sum game where one party must lose
B) Trade can benefit everyone by allowing for specialization
C) Trade always benefits one party at the expense of another
D) Trade eliminates scarcity
, Correct Answer: B
Rationale: Principle #5 states that trade can make everyone better off. Trade allows each
person to specialize in the activities they do best, whether it be farming, sewing, or home
building. By trading with others, people can buy a greater variety of goods and services at
lower cost.
8. The opportunity cost of a choice is:
A) The total cost of all options
B) The monetary cost of the option chosen
C) The value of the next best alternative given up
D) The cost of the resources used
Correct Answer: C
Rationale: Opportunity cost is the value of the next best alternative that must be given up
when a choice is made. It represents what you sacrifice to obtain something else.
9. Which of the following explains the Law of Increasing Opportunity Costs as
depicted by a Production Possibilities Frontier (PPF)?
A) The downward slope of the PPF
B) The upward slope of the PPF
C) The bowed-out (concave) shape of the PPF
D) The points outside the PPF
Correct Answer: C
Rationale: The bowed-out shape of the PPF reflects the law of increasing opportunity costs.
As production of one good increases, the opportunity cost of producing additional units of
that good rises because resources are not perfectly adaptable to producing both goods.
