WGU - D089 Principles of Economics 300+ (Fully
Updated 2026/2027) Exam Questions + Verified
& Rationalized Answers A+ Graded
1. The fundamental problem of economics is:
A) Inflation
B) Scarcity
C) Unemployment
D) Recession
Answer: B
Rationale: Scarcity means unlimited wants exceed limited resources, forcing choices.
2. Opportunity cost is best defined as:
A) The money cost of a good
B) The value of the next best alternative forgone
C) The total cost of production
D) The cost of all alternatives
Answer: B
Rationale: Opportunity cost is what you give up to get something else.
3. A production possibilities frontier (PPF) shows:
A) The maximum combinations of two goods an economy can produce
B) The maximum combinations of two goods an economy can produce
C) The minimum cost of production
D) The demand for goods
Answer: A
Rationale: PPF illustrates trade-offs and efficient use of resources.
,4. A point inside the PPF indicates:
A) Efficient production
B) Inefficient production
C) Unattainable production
D) Maximum production
Answer: B
Rationale: Inside the PPF means resources are underutilized or inefficiently allocated.
5. The law of demand states that, all else equal, as price rises:
A) Quantity demanded rises
B) Quantity demanded falls
C) Demand rises
D) Supply falls
Answer: B
Rationale: There is an inverse relationship between price and quantity demanded.
6. A movement along the demand curve is caused by a change in:
A) Income
B) Price of the good
C) Tastes
D) Price of related goods
Answer: B
Rationale: A change in the good's own price causes movement along the curve.
7. A shift in the demand curve can be caused by:
A) A change in the good's price
2
,B) A change in consumer income
C) A change in the good's supply
D) A change in production technology
Answer: B
Rationale: Income changes shift demand; price changes move along the curve.
8. The law of supply states that, all else equal, as price rises:
A) Quantity supplied falls
B) Quantity supplied rises
C) Supply falls
D) Demand rises
Answer: B
Rationale: Producers are willing to supply more at higher prices.
9. Market equilibrium occurs when:
A) Quantity demanded exceeds quantity supplied
B) Quantity demanded equals quantity supplied
C) Quantity supplied exceeds quantity demanded
D) Price is zero
Answer: B
Rationale: Equilibrium is where the demand and supply curves intersect.
10. A surplus exists when:
A) Price is below equilibrium
B) Price is above equilibrium
C) Demand equals supply
D) Supply is zero
Answer: B
3
, Rationale: At a price above equilibrium, quantity supplied exceeds quantity demanded.
11. A shortage exists when:
A) Price is below equilibrium
B) Price is above equilibrium
C) Demand equals supply
D) Supply is zero
Answer: A
Rationale: At a price below equilibrium, quantity demanded exceeds quantity supplied.
12. Price elasticity of demand measures:
A) How quantity demanded responds to a change in income
B) How quantity demanded responds to a change in price
C) How supply responds to price
D) How costs change with output
Answer: B
Rationale: Elasticity = % change in quantity demanded / % change in price.
13. If demand is elastic, a price increase will:
A) Increase total revenue
B) Decrease total revenue
C) Not change total revenue
D) Increase quantity demanded
Answer: B
Rationale: Elastic demand means quantity falls proportionally more than price rises.
14. If demand is inelastic, a price increase will:
4
Updated 2026/2027) Exam Questions + Verified
& Rationalized Answers A+ Graded
1. The fundamental problem of economics is:
A) Inflation
B) Scarcity
C) Unemployment
D) Recession
Answer: B
Rationale: Scarcity means unlimited wants exceed limited resources, forcing choices.
2. Opportunity cost is best defined as:
A) The money cost of a good
B) The value of the next best alternative forgone
C) The total cost of production
D) The cost of all alternatives
Answer: B
Rationale: Opportunity cost is what you give up to get something else.
3. A production possibilities frontier (PPF) shows:
A) The maximum combinations of two goods an economy can produce
B) The maximum combinations of two goods an economy can produce
C) The minimum cost of production
D) The demand for goods
Answer: A
Rationale: PPF illustrates trade-offs and efficient use of resources.
,4. A point inside the PPF indicates:
A) Efficient production
B) Inefficient production
C) Unattainable production
D) Maximum production
Answer: B
Rationale: Inside the PPF means resources are underutilized or inefficiently allocated.
5. The law of demand states that, all else equal, as price rises:
A) Quantity demanded rises
B) Quantity demanded falls
C) Demand rises
D) Supply falls
Answer: B
Rationale: There is an inverse relationship between price and quantity demanded.
6. A movement along the demand curve is caused by a change in:
A) Income
B) Price of the good
C) Tastes
D) Price of related goods
Answer: B
Rationale: A change in the good's own price causes movement along the curve.
7. A shift in the demand curve can be caused by:
A) A change in the good's price
2
,B) A change in consumer income
C) A change in the good's supply
D) A change in production technology
Answer: B
Rationale: Income changes shift demand; price changes move along the curve.
8. The law of supply states that, all else equal, as price rises:
A) Quantity supplied falls
B) Quantity supplied rises
C) Supply falls
D) Demand rises
Answer: B
Rationale: Producers are willing to supply more at higher prices.
9. Market equilibrium occurs when:
A) Quantity demanded exceeds quantity supplied
B) Quantity demanded equals quantity supplied
C) Quantity supplied exceeds quantity demanded
D) Price is zero
Answer: B
Rationale: Equilibrium is where the demand and supply curves intersect.
10. A surplus exists when:
A) Price is below equilibrium
B) Price is above equilibrium
C) Demand equals supply
D) Supply is zero
Answer: B
3
, Rationale: At a price above equilibrium, quantity supplied exceeds quantity demanded.
11. A shortage exists when:
A) Price is below equilibrium
B) Price is above equilibrium
C) Demand equals supply
D) Supply is zero
Answer: A
Rationale: At a price below equilibrium, quantity demanded exceeds quantity supplied.
12. Price elasticity of demand measures:
A) How quantity demanded responds to a change in income
B) How quantity demanded responds to a change in price
C) How supply responds to price
D) How costs change with output
Answer: B
Rationale: Elasticity = % change in quantity demanded / % change in price.
13. If demand is elastic, a price increase will:
A) Increase total revenue
B) Decrease total revenue
C) Not change total revenue
D) Increase quantity demanded
Answer: B
Rationale: Elastic demand means quantity falls proportionally more than price rises.
14. If demand is inelastic, a price increase will:
4
