WGU D089 LATEST EXAM PRINCIPLES OF ECONOMICS EXAM QUESTIONS AND
CORRECT ANSWERS | LATEST VERSION | ALREADY GRADED A+ | JUST RELEASED
Question 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. In contrast,
microeconomics focuses on individual agents like consumers and firms.
Question 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 (land, labor, capital)
are finite but human desires are infinite, societies must make choices about how to allocate
those resources.
Question 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. By studying, the student foregoes the "next best" option, which was the movie.
Question 4
Which concept describes the incremental increase in benefit to a consumer caused by the
consumption of one additional unit of a good?
, 2
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. Rational people make
decisions by comparing this to marginal cost.
Question 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, rather than looking at total averages.
Question 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. Countries where
workers can produce a large quantity of goods and services per unit of time enjoy a higher
quality of life.
Question 7
What is the most common cause of inflation (a general rise in prices) according to economic
principles?
A) Increased competition
B) A decrease in the money supply
, 3
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: Principle #9 states that 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.
Question 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: Principle #10 suggests that in the short run, policy-makers can influence the mix
of inflation and unemployment; reducing inflation often involves a contraction that
increases unemployment temporarily.
Question 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. Decisions about what to produce
and how to distribute it are based on how the tribe or family has done it for generations.
Question 10
Which characteristic is typical of a Traditional Economy?
A) High levels of technological innovation
B) Heavy reliance on bartering rather than currency
C) Central planning by a dictator
/D) Use of complex stock markets
E) Excessive surplus production
Correct Answer: B) Heavy reliance on bartering rather than currency
Rationale: Traditional economies are often non-monetary and rely on the direct exchange of
goods and services (bartering) within nomadic or hunter-gatherer societies.
, 4
Question 11
What is a major disadvantage of a Traditional Economy?
A) High levels of domestic competition
B) Vulnerability to environmental changes and weather patterns
C) Excessive government regulation
D) Complex black markets
E) Over-innovation
Correct Answer: B) Vulnerability to environmental changes and weather patterns
Rationale: Because traditional economies rely on subsistence farming, hunting, and
gathering, a drought or natural disaster can completely devastate the society's food supply.
Question 12
In a Command Economy, who determines the prices, investments, and incomes?
A) Individual consumers
B) Private business owners
C) The forces of supply and demand
D) A centralized government power
E) International trade organizations
Correct Answer: D) A centralized government power
Rationale: In a command system (like communism), the government owns the factors of
production and makes all major economic decisions through a central plan.
Question 13
Which of the following is an advantage of a Command Economy?
A) It rewards individual innovation
B) It allows for rapid societal transformation to meet a national vision
C) It prevents the formation of black markets
D) It relies on market efficiency and price signals
E) It minimizes government interference in private life
Correct Answer: B) It allows for rapid societal transformation to meet a national vision
Rationale: Command economies can mobilize resources quickly on a massive scale for
national goals (like industrialization or war) because the government has total control over
labor and capital.
Question 14
Which characteristic describes a Market Economy?
A) All businesses are government-owned monopolies
B) Prices are determined by a central committee
C) Prices and production are driven by competition and self-motivation
D) Innovation is discouraged to maintain stability
E) Private property rights are non-existent
CORRECT ANSWERS | LATEST VERSION | ALREADY GRADED A+ | JUST RELEASED
Question 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. In contrast,
microeconomics focuses on individual agents like consumers and firms.
Question 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 (land, labor, capital)
are finite but human desires are infinite, societies must make choices about how to allocate
those resources.
Question 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. By studying, the student foregoes the "next best" option, which was the movie.
Question 4
Which concept describes the incremental increase in benefit to a consumer caused by the
consumption of one additional unit of a good?
, 2
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. Rational people make
decisions by comparing this to marginal cost.
Question 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, rather than looking at total averages.
Question 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. Countries where
workers can produce a large quantity of goods and services per unit of time enjoy a higher
quality of life.
Question 7
What is the most common cause of inflation (a general rise in prices) according to economic
principles?
A) Increased competition
B) A decrease in the money supply
, 3
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: Principle #9 states that 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.
Question 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: Principle #10 suggests that in the short run, policy-makers can influence the mix
of inflation and unemployment; reducing inflation often involves a contraction that
increases unemployment temporarily.
Question 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. Decisions about what to produce
and how to distribute it are based on how the tribe or family has done it for generations.
Question 10
Which characteristic is typical of a Traditional Economy?
A) High levels of technological innovation
B) Heavy reliance on bartering rather than currency
C) Central planning by a dictator
/D) Use of complex stock markets
E) Excessive surplus production
Correct Answer: B) Heavy reliance on bartering rather than currency
Rationale: Traditional economies are often non-monetary and rely on the direct exchange of
goods and services (bartering) within nomadic or hunter-gatherer societies.
, 4
Question 11
What is a major disadvantage of a Traditional Economy?
A) High levels of domestic competition
B) Vulnerability to environmental changes and weather patterns
C) Excessive government regulation
D) Complex black markets
E) Over-innovation
Correct Answer: B) Vulnerability to environmental changes and weather patterns
Rationale: Because traditional economies rely on subsistence farming, hunting, and
gathering, a drought or natural disaster can completely devastate the society's food supply.
Question 12
In a Command Economy, who determines the prices, investments, and incomes?
A) Individual consumers
B) Private business owners
C) The forces of supply and demand
D) A centralized government power
E) International trade organizations
Correct Answer: D) A centralized government power
Rationale: In a command system (like communism), the government owns the factors of
production and makes all major economic decisions through a central plan.
Question 13
Which of the following is an advantage of a Command Economy?
A) It rewards individual innovation
B) It allows for rapid societal transformation to meet a national vision
C) It prevents the formation of black markets
D) It relies on market efficiency and price signals
E) It minimizes government interference in private life
Correct Answer: B) It allows for rapid societal transformation to meet a national vision
Rationale: Command economies can mobilize resources quickly on a massive scale for
national goals (like industrialization or war) because the government has total control over
labor and capital.
Question 14
Which characteristic describes a Market Economy?
A) All businesses are government-owned monopolies
B) Prices are determined by a central committee
C) Prices and production are driven by competition and self-motivation
D) Innovation is discouraged to maintain stability
E) Private property rights are non-existent
