WGU D089 – Principles of Economics Exam
Final Exam Prep (Latest Update 2026 /
2027) Questions and Verified Answers |
100% Correct | Grade A.
1. Which economic concept refers to the value of the next-best
alternative that must be given up when making a choice?
A. Marginal benefit
B. Scarcity
C. Opportunity cost
D. Comparative advantage
Rationale: Opportunity cost is the value of the next-best alternative
forgone when a decision is made. Because resources are limited and
individuals and organizations face competing uses for those resources,
every choice involves an opportunity cost.
2. The fundamental economic problem exists because:
A. Businesses always seek to maximize profits.
B. Consumers have unlimited income.
C. Governments control all resources.
D. Resources are scarce while human wants are unlimited.
Rationale: Scarcity is the fundamental economic problem. Society has
limited resources such as labor, capital, land, and entrepreneurship, but
,human wants and needs are effectively unlimited. Economics studies
how scarce resources can be allocated among competing uses.
3. Which of the following is an example of a positive economic
statement?
A. The government should reduce taxes on businesses.
B. The minimum wage is unfair to small businesses.
C. An increase in interest rates tends to reduce borrowing.
D. Inflation is harmful to society.
Rationale: A positive economic statement describes an observable
relationship that can be tested using evidence. Statements involving
what should or should not happen are normative statements and reflect
opinions or value judgments.
4. A production possibilities frontier (PPF) illustrates:
A. The relationship between income and consumer preferences.
B. The maximum combinations of two goods an economy can produce
with available resources and technology.
C. The equilibrium price in a competitive market.
D. The relationship between inflation and unemployment.
Rationale: A PPF represents the maximum feasible combinations of two
goods or services that can be produced using available resources and
technology efficiently. Points inside the frontier indicate inefficiency,
while points outside the frontier are unattainable with current resources
and technology.
,5. An economy is operating at a point inside its production
possibilities frontier. What does this most likely indicate?
A. Economic growth
B. Full productive efficiency
C. Underutilization of resources
D. An unattainable production level
Rationale: A point inside the PPF indicates that the economy could
produce more of at least one good without sacrificing production of
another. This commonly occurs because resources such as workers,
factories, or capital are unemployed or inefficiently used.
6. Which factor would most likely cause a production possibilities
frontier to shift outward?
A. A decline in the labor force
B. Destruction of capital equipment
C. Technological advancement
D. A decrease in worker productivity
Rationale: An outward shift of the PPF represents an increase in an
economy's productive capacity. Technological improvements can allow
existing resources to produce more output, causing the economy's
production possibilities to expand.
7. Which economic system relies primarily on voluntary exchange and
decentralized decision-making by individuals and businesses?
, A. Command economy
B. Traditional economy
C. Market economy
D. Subsistence economy
Rationale: A market economy relies on decentralized decisions made by
consumers and producers. Prices, competition, and voluntary exchange
help coordinate economic activity rather than a central authority
determining most production and allocation decisions.
8. According to the law of demand, assuming other factors remain
constant:
A. Quantity demanded increases when price increases.
B. Quantity demanded is unrelated to price.
C. Quantity demanded decreases when price increases.
D. Demand always increases when income decreases.
Rationale: The law of demand states that there is generally an inverse
relationship between the price of a good and the quantity demanded,
holding other factors constant. Consumers tend to purchase less when a
product becomes more expensive and more when its price falls.
9. Which event would cause the demand curve for a normal good to
shift to the right?
A. A decrease in consumer income
B. A decrease in the price of the good itself
Final Exam Prep (Latest Update 2026 /
2027) Questions and Verified Answers |
100% Correct | Grade A.
1. Which economic concept refers to the value of the next-best
alternative that must be given up when making a choice?
A. Marginal benefit
B. Scarcity
C. Opportunity cost
D. Comparative advantage
Rationale: Opportunity cost is the value of the next-best alternative
forgone when a decision is made. Because resources are limited and
individuals and organizations face competing uses for those resources,
every choice involves an opportunity cost.
2. The fundamental economic problem exists because:
A. Businesses always seek to maximize profits.
B. Consumers have unlimited income.
C. Governments control all resources.
D. Resources are scarce while human wants are unlimited.
Rationale: Scarcity is the fundamental economic problem. Society has
limited resources such as labor, capital, land, and entrepreneurship, but
,human wants and needs are effectively unlimited. Economics studies
how scarce resources can be allocated among competing uses.
3. Which of the following is an example of a positive economic
statement?
A. The government should reduce taxes on businesses.
B. The minimum wage is unfair to small businesses.
C. An increase in interest rates tends to reduce borrowing.
D. Inflation is harmful to society.
Rationale: A positive economic statement describes an observable
relationship that can be tested using evidence. Statements involving
what should or should not happen are normative statements and reflect
opinions or value judgments.
4. A production possibilities frontier (PPF) illustrates:
A. The relationship between income and consumer preferences.
B. The maximum combinations of two goods an economy can produce
with available resources and technology.
C. The equilibrium price in a competitive market.
D. The relationship between inflation and unemployment.
Rationale: A PPF represents the maximum feasible combinations of two
goods or services that can be produced using available resources and
technology efficiently. Points inside the frontier indicate inefficiency,
while points outside the frontier are unattainable with current resources
and technology.
,5. An economy is operating at a point inside its production
possibilities frontier. What does this most likely indicate?
A. Economic growth
B. Full productive efficiency
C. Underutilization of resources
D. An unattainable production level
Rationale: A point inside the PPF indicates that the economy could
produce more of at least one good without sacrificing production of
another. This commonly occurs because resources such as workers,
factories, or capital are unemployed or inefficiently used.
6. Which factor would most likely cause a production possibilities
frontier to shift outward?
A. A decline in the labor force
B. Destruction of capital equipment
C. Technological advancement
D. A decrease in worker productivity
Rationale: An outward shift of the PPF represents an increase in an
economy's productive capacity. Technological improvements can allow
existing resources to produce more output, causing the economy's
production possibilities to expand.
7. Which economic system relies primarily on voluntary exchange and
decentralized decision-making by individuals and businesses?
, A. Command economy
B. Traditional economy
C. Market economy
D. Subsistence economy
Rationale: A market economy relies on decentralized decisions made by
consumers and producers. Prices, competition, and voluntary exchange
help coordinate economic activity rather than a central authority
determining most production and allocation decisions.
8. According to the law of demand, assuming other factors remain
constant:
A. Quantity demanded increases when price increases.
B. Quantity demanded is unrelated to price.
C. Quantity demanded decreases when price increases.
D. Demand always increases when income decreases.
Rationale: The law of demand states that there is generally an inverse
relationship between the price of a good and the quantity demanded,
holding other factors constant. Consumers tend to purchase less when a
product becomes more expensive and more when its price falls.
9. Which event would cause the demand curve for a normal good to
shift to the right?
A. A decrease in consumer income
B. A decrease in the price of the good itself
