WGU D089 Principles Of Economics Objective
Assessment (OA) Exam Review 2026/2027| All
Questions And Solutions (Rationales) | Exam
Prep Q&A 2026/2027
Question 1. A local bakery notices that the price of wheat flour has increased significantly.
Assuming all other factors remain constant, what is the most likely short-run effect on the
supply of bread?
A. The supply curve shifts to the right because production becomes more expensive.
B. The supply curve shifts to the left because production costs have increased.
C. The demand curve shifts to the right because consumers prefer more expensive bread.
D. The quantity supplied increases at every possible price.
Rationale: An increase in an input price raises production costs and reduces the quantity
producers are willing and able to supply at each price. This shifts the supply curve to the left,
assuming other determinants remain unchanged.
Question 2. A consumer has $60 to spend on two products: books costing $15 each and
meals costing $10 each. If the consumer purchases two books, how many meals can be
purchased with the remaining budget?
A. Two meals
B. Three meals
C. Four meals
D. Five meals
Rationale: Two books cost $30, leaving $30 from the $60 budget. At $10 per meal, the
consumer can purchase three meals. Therefore, the correct answer is B, not C.
Question 3. A government imposes a binding price ceiling on rental housing below the
market equilibrium rent. Which outcome is most likely to occur in the rental market?
A. A surplus of rental housing
,B. An increase in equilibrium rent
C. An elimination of housing scarcity
D. A shortage of rental housing
Rationale: A binding price ceiling keeps rent below the equilibrium level. At the lower price,
quantity demanded increases while quantity supplied decreases, creating a shortage.
Question 4. A firm increases its production from 100 units to 120 units. Total production
costs rise from $2,000 to $2,500. What is the marginal cost of producing the additional
units?
A. $25 per unit
B. $20 per unit
C. $2.50 per unit
D. $500 per unit
Rationale: Marginal cost equals the change in total cost divided by the change in quantity.
The calculation is ($2,500 − $2,000) ÷ (120 − 100) = $500 ÷ 20 = $25 per additional unit.
Question 5. A consumer purchases fewer restaurant meals after the price of restaurant
meals increases, while income and preferences remain unchanged. Which economic
principle best explains this response?
A. The law of supply
B. The law of diminishing marginal utility
C. The law of demand
D. The principle of comparative advantage
Rationale: The law of demand states that, other things being equal, a higher price generally
reduces the quantity demanded of a good or service.
Question 6. An economy produces only wheat and computers. It is currently producing a
combination of these goods on its production possibilities frontier. What does this position
indicate?
A. The economy has eliminated scarcity.
B. The economy is using its available resources efficiently.
,C. The economy can increase production of both goods without additional resources.
D. The economy has no opportunity cost when reallocating resources.
Rationale: A point on the production possibilities frontier represents an attainable
combination produced using resources efficiently, given current technology and available
resources. Producing more of one good generally requires sacrificing some of the other.
Question 7. A country's central bank purchases government securities in an open-market
operation. Assuming the purchases are not offset by other policy actions, what is the most
likely immediate effect on the banking system?
A. Bank reserves increase, potentially expanding the money supply.
B. Bank reserves decrease, reducing lending capacity.
C. Government tax revenue immediately increases.
D. The required reserve ratio automatically doubles.
Rationale: When a central bank purchases securities, it injects funds into the banking system.
Higher reserves can support additional lending, although the actual expansion depends on
bank behavior, borrower demand, and monetary conditions.
Question 8. A company sells 500 units of a product at $40 each. Its total variable costs are
$12,000, and its fixed costs are $5,000. What is the company's total profit?
A. $3,000
B. $5,000
C. $7,000
D. $8,000
Rationale: Total revenue is 500 × $40 = $20,000. Total cost is $12,000 + $5,000 = $17,000.
Profit is $20,000 − $17,000 = $3,000. The correct answer is A.
Question 9. A country can produce either 100 tons of maize or 50 tons of rice using the
same resources. Assuming constant opportunity costs, what is the opportunity cost of
producing one ton of rice?
A. One ton of maize
B. Two tons of maize
, C. Half a ton of maize
D. Five tons of maize
Rationale: The country sacrifices 100 tons of maize to produce 50 tons of rice. Therefore, the
opportunity cost per ton of rice is 100 ÷ 50 = 2 tons of maize.
Question 10. A business owner decides to remain open for one additional hour. The extra
hour is expected to generate $180 in revenue and incur $120 in additional operating costs.
What should the owner do if the objective is to maximize profit and no other relevant costs
or benefits exist?
A. Close immediately because revenue is not equal to total historical costs.
B. Remain open only if fixed costs also decrease.
C. Remain open because the additional hour increases profit by $60.
D. Close because marginal revenue is below average revenue.
Rationale: The incremental profit is additional revenue minus additional cost: $180 − $120 =
$60. Because the additional hour generates positive incremental profit, remaining open
improves the owner's financial outcome.
Question 11. An economy experiences a sustained increase in the general price level. Which
measure is most appropriate for tracking this change over time?
A. The unemployment rate
B. The nominal interest rate alone
C. The current account balance
D. The consumer price index
Rationale: The consumer price index measures changes over time in the prices of a
representative basket of consumer goods and services. It is commonly used to monitor
consumer-price inflation.
Question 12. A student can spend Saturday working for $80 or attend a free economics
workshop. The student chooses the workshop. Assuming no other relevant alternatives or
benefits, what is the opportunity cost of attending?
A. $80 in forgone earnings
B. Zero because the workshop has no admission fee
Assessment (OA) Exam Review 2026/2027| All
Questions And Solutions (Rationales) | Exam
Prep Q&A 2026/2027
Question 1. A local bakery notices that the price of wheat flour has increased significantly.
Assuming all other factors remain constant, what is the most likely short-run effect on the
supply of bread?
A. The supply curve shifts to the right because production becomes more expensive.
B. The supply curve shifts to the left because production costs have increased.
C. The demand curve shifts to the right because consumers prefer more expensive bread.
D. The quantity supplied increases at every possible price.
Rationale: An increase in an input price raises production costs and reduces the quantity
producers are willing and able to supply at each price. This shifts the supply curve to the left,
assuming other determinants remain unchanged.
Question 2. A consumer has $60 to spend on two products: books costing $15 each and
meals costing $10 each. If the consumer purchases two books, how many meals can be
purchased with the remaining budget?
A. Two meals
B. Three meals
C. Four meals
D. Five meals
Rationale: Two books cost $30, leaving $30 from the $60 budget. At $10 per meal, the
consumer can purchase three meals. Therefore, the correct answer is B, not C.
Question 3. A government imposes a binding price ceiling on rental housing below the
market equilibrium rent. Which outcome is most likely to occur in the rental market?
A. A surplus of rental housing
,B. An increase in equilibrium rent
C. An elimination of housing scarcity
D. A shortage of rental housing
Rationale: A binding price ceiling keeps rent below the equilibrium level. At the lower price,
quantity demanded increases while quantity supplied decreases, creating a shortage.
Question 4. A firm increases its production from 100 units to 120 units. Total production
costs rise from $2,000 to $2,500. What is the marginal cost of producing the additional
units?
A. $25 per unit
B. $20 per unit
C. $2.50 per unit
D. $500 per unit
Rationale: Marginal cost equals the change in total cost divided by the change in quantity.
The calculation is ($2,500 − $2,000) ÷ (120 − 100) = $500 ÷ 20 = $25 per additional unit.
Question 5. A consumer purchases fewer restaurant meals after the price of restaurant
meals increases, while income and preferences remain unchanged. Which economic
principle best explains this response?
A. The law of supply
B. The law of diminishing marginal utility
C. The law of demand
D. The principle of comparative advantage
Rationale: The law of demand states that, other things being equal, a higher price generally
reduces the quantity demanded of a good or service.
Question 6. An economy produces only wheat and computers. It is currently producing a
combination of these goods on its production possibilities frontier. What does this position
indicate?
A. The economy has eliminated scarcity.
B. The economy is using its available resources efficiently.
,C. The economy can increase production of both goods without additional resources.
D. The economy has no opportunity cost when reallocating resources.
Rationale: A point on the production possibilities frontier represents an attainable
combination produced using resources efficiently, given current technology and available
resources. Producing more of one good generally requires sacrificing some of the other.
Question 7. A country's central bank purchases government securities in an open-market
operation. Assuming the purchases are not offset by other policy actions, what is the most
likely immediate effect on the banking system?
A. Bank reserves increase, potentially expanding the money supply.
B. Bank reserves decrease, reducing lending capacity.
C. Government tax revenue immediately increases.
D. The required reserve ratio automatically doubles.
Rationale: When a central bank purchases securities, it injects funds into the banking system.
Higher reserves can support additional lending, although the actual expansion depends on
bank behavior, borrower demand, and monetary conditions.
Question 8. A company sells 500 units of a product at $40 each. Its total variable costs are
$12,000, and its fixed costs are $5,000. What is the company's total profit?
A. $3,000
B. $5,000
C. $7,000
D. $8,000
Rationale: Total revenue is 500 × $40 = $20,000. Total cost is $12,000 + $5,000 = $17,000.
Profit is $20,000 − $17,000 = $3,000. The correct answer is A.
Question 9. A country can produce either 100 tons of maize or 50 tons of rice using the
same resources. Assuming constant opportunity costs, what is the opportunity cost of
producing one ton of rice?
A. One ton of maize
B. Two tons of maize
, C. Half a ton of maize
D. Five tons of maize
Rationale: The country sacrifices 100 tons of maize to produce 50 tons of rice. Therefore, the
opportunity cost per ton of rice is 100 ÷ 50 = 2 tons of maize.
Question 10. A business owner decides to remain open for one additional hour. The extra
hour is expected to generate $180 in revenue and incur $120 in additional operating costs.
What should the owner do if the objective is to maximize profit and no other relevant costs
or benefits exist?
A. Close immediately because revenue is not equal to total historical costs.
B. Remain open only if fixed costs also decrease.
C. Remain open because the additional hour increases profit by $60.
D. Close because marginal revenue is below average revenue.
Rationale: The incremental profit is additional revenue minus additional cost: $180 − $120 =
$60. Because the additional hour generates positive incremental profit, remaining open
improves the owner's financial outcome.
Question 11. An economy experiences a sustained increase in the general price level. Which
measure is most appropriate for tracking this change over time?
A. The unemployment rate
B. The nominal interest rate alone
C. The current account balance
D. The consumer price index
Rationale: The consumer price index measures changes over time in the prices of a
representative basket of consumer goods and services. It is commonly used to monitor
consumer-price inflation.
Question 12. A student can spend Saturday working for $80 or attend a free economics
workshop. The student chooses the workshop. Assuming no other relevant alternatives or
benefits, what is the opportunity cost of attending?
A. $80 in forgone earnings
B. Zero because the workshop has no admission fee
