WGU C211 – Global Economics for Managers FINAL
EXAM (2025/2026)Complete Practice Questions with
Verified Answers and Rationales | Most Tested
Q1. When production costs increase, the law of supply predicts:
A) Supply remains constant
B) As price rises, quantity supplied increases
C) Quantity supplied decreases
D) Supply becomes perfectly inelastic
Rationale: Higher prices incentivize producers to supply more, despite higher costs. Managers
can adjust production to maintain profitability.
Q2. Specialization based on comparative advantage allows a company to:
A) Reduce output
B) Maximize efficiency and gains from trade
C) Avoid imports completely
D) Focus only on domestic sales
Rationale: Comparative advantage focuses resources on activities with the lowest opportunity
cost, increasing overall productivity.
Q3. A manager notices that demand for their product increases. What is the likely short-term
effect?
A) Lower prices
B) Higher prices and higher quantity sold
C) Reduced revenue
D) No change in output
Rationale: Higher demand shifts the demand curve right, raising equilibrium price and quantity.
Q4. Marginal cost is defined as:
A) Total production cost
B) Cost of producing one additional unit
,C) Fixed cost
D) Average cost
Rationale: Managers use marginal cost to determine the optimal production level for
maximizing profits.
Q5. A firm in perfect competition:
A) Sets its own prices
B) Takes the market price as given
C) Restricts entry
D) Produces differentiated products
Rationale: Many firms selling identical goods are price takers, influencing output decisions
rather than price.
Q6. Price elasticity of demand indicates:
A) Total revenue
B) Responsiveness of quantity demanded to price changes
C) Supply flexibility
D) Production efficiency
Rationale: Understanding elasticity helps managers adjust prices without losing significant
sales.
Q7. If the price of a substitute product rises, demand for your product is likely to:
A) Fall
B) Increase
C) Remain the same
D) Reduce your costs
Rationale: Consumers will switch to your product as the substitute becomes more expensive.
Q8. Which of the following is an example of a negative externality?
A) Employee training
B) Factory pollution affecting local residents
C) Customer loyalty programs
D) Improved workflow
,Rationale: Negative externalities impose costs on others outside the transaction, potentially
requiring managerial mitigation strategies.
Q9. Economies of scale allow a firm to:
A) Increase average costs
B) Reduce average costs as production increases
C) Limit production
D) Reduce revenue
Rationale: Spreading fixed costs over a larger output reduces per-unit cost, increasing
profitability.
Q10. The opportunity cost of a managerial decision is:
A) Total cost of all options
B) Value of the next best alternative forgone
C) Revenue from the chosen option only
D) Sunk cost
Rationale: Managers must consider what they give up to make efficient resource allocation
decisions.
Q11. Which of the following best describes consumer surplus?
A) Amount producers gain from sales
B) Difference between what consumers are willing to pay and what they actually pay
C) Total expenditure on goods
D) Tax revenue collected
Rationale: Consumer surplus reflects the benefit buyers receive beyond the market price,
informing pricing strategies.
Q12. When a firm faces diminishing marginal returns:
A) Each additional unit costs less to produce
B) Each additional unit adds less output than the previous unit
C) Total output decreases
D) Fixed costs fall
Rationale: Diminishing marginal returns affect production efficiency and decision-making for
scaling operations.
, Q13. A shift to the right in a product’s demand curve could result from:
A) Higher product price
B) Increase in consumer income for normal goods
C) Increase in input costs
D) Decrease in population
Rationale: More income increases purchasing power, boosting demand for normal goods.
Q14. Which scenario represents a positive externality?
A) Air pollution
B) Traffic congestion
C) Vaccination reducing disease spread
D) Excessive noise
Rationale: Positive externalities provide societal benefits beyond individual gains, which can
influence managerial decision-making.
Q15. The marginal propensity to consume (MPC) measures:
A) Total consumption
B) Fraction of additional income spent on consumption
C) Total savings
D) Government expenditure
Rationale: MPC indicates how much of incremental income drives demand, affecting
managerial forecasts.
Q16. In a perfectly competitive market, profit-maximizing output occurs where:
A) Price exceeds marginal cost
B) Price equals marginal cost
C) Marginal revenue is zero
D) Average cost is minimized
Rationale: Producing where P = MC ensures maximum profit in competitive markets.
Q17. Managerial concern with inelastic demand:
A) Price changes have large effects on sales
EXAM (2025/2026)Complete Practice Questions with
Verified Answers and Rationales | Most Tested
Q1. When production costs increase, the law of supply predicts:
A) Supply remains constant
B) As price rises, quantity supplied increases
C) Quantity supplied decreases
D) Supply becomes perfectly inelastic
Rationale: Higher prices incentivize producers to supply more, despite higher costs. Managers
can adjust production to maintain profitability.
Q2. Specialization based on comparative advantage allows a company to:
A) Reduce output
B) Maximize efficiency and gains from trade
C) Avoid imports completely
D) Focus only on domestic sales
Rationale: Comparative advantage focuses resources on activities with the lowest opportunity
cost, increasing overall productivity.
Q3. A manager notices that demand for their product increases. What is the likely short-term
effect?
A) Lower prices
B) Higher prices and higher quantity sold
C) Reduced revenue
D) No change in output
Rationale: Higher demand shifts the demand curve right, raising equilibrium price and quantity.
Q4. Marginal cost is defined as:
A) Total production cost
B) Cost of producing one additional unit
,C) Fixed cost
D) Average cost
Rationale: Managers use marginal cost to determine the optimal production level for
maximizing profits.
Q5. A firm in perfect competition:
A) Sets its own prices
B) Takes the market price as given
C) Restricts entry
D) Produces differentiated products
Rationale: Many firms selling identical goods are price takers, influencing output decisions
rather than price.
Q6. Price elasticity of demand indicates:
A) Total revenue
B) Responsiveness of quantity demanded to price changes
C) Supply flexibility
D) Production efficiency
Rationale: Understanding elasticity helps managers adjust prices without losing significant
sales.
Q7. If the price of a substitute product rises, demand for your product is likely to:
A) Fall
B) Increase
C) Remain the same
D) Reduce your costs
Rationale: Consumers will switch to your product as the substitute becomes more expensive.
Q8. Which of the following is an example of a negative externality?
A) Employee training
B) Factory pollution affecting local residents
C) Customer loyalty programs
D) Improved workflow
,Rationale: Negative externalities impose costs on others outside the transaction, potentially
requiring managerial mitigation strategies.
Q9. Economies of scale allow a firm to:
A) Increase average costs
B) Reduce average costs as production increases
C) Limit production
D) Reduce revenue
Rationale: Spreading fixed costs over a larger output reduces per-unit cost, increasing
profitability.
Q10. The opportunity cost of a managerial decision is:
A) Total cost of all options
B) Value of the next best alternative forgone
C) Revenue from the chosen option only
D) Sunk cost
Rationale: Managers must consider what they give up to make efficient resource allocation
decisions.
Q11. Which of the following best describes consumer surplus?
A) Amount producers gain from sales
B) Difference between what consumers are willing to pay and what they actually pay
C) Total expenditure on goods
D) Tax revenue collected
Rationale: Consumer surplus reflects the benefit buyers receive beyond the market price,
informing pricing strategies.
Q12. When a firm faces diminishing marginal returns:
A) Each additional unit costs less to produce
B) Each additional unit adds less output than the previous unit
C) Total output decreases
D) Fixed costs fall
Rationale: Diminishing marginal returns affect production efficiency and decision-making for
scaling operations.
, Q13. A shift to the right in a product’s demand curve could result from:
A) Higher product price
B) Increase in consumer income for normal goods
C) Increase in input costs
D) Decrease in population
Rationale: More income increases purchasing power, boosting demand for normal goods.
Q14. Which scenario represents a positive externality?
A) Air pollution
B) Traffic congestion
C) Vaccination reducing disease spread
D) Excessive noise
Rationale: Positive externalities provide societal benefits beyond individual gains, which can
influence managerial decision-making.
Q15. The marginal propensity to consume (MPC) measures:
A) Total consumption
B) Fraction of additional income spent on consumption
C) Total savings
D) Government expenditure
Rationale: MPC indicates how much of incremental income drives demand, affecting
managerial forecasts.
Q16. In a perfectly competitive market, profit-maximizing output occurs where:
A) Price exceeds marginal cost
B) Price equals marginal cost
C) Marginal revenue is zero
D) Average cost is minimized
Rationale: Producing where P = MC ensures maximum profit in competitive markets.
Q17. Managerial concern with inelastic demand:
A) Price changes have large effects on sales
