WGU D089 PRINCIPLES OF ECONOMICS EXAM ACTUAL
EXAM ALL 350 QUESTIONS AND CORRECT SOLUTIONS
JUST RELEASED
QUESTION: When analyzing economic problems, especially when confronted with models of
choice, economic models use simplifying assumptions to let them focus on choice.
Which simplifying assumption is important for analyzing consumer behavior?
One product
Unlimited time
Specific prices
Flexible budget - ANSWER-Specific prices
The consumer must know the price of each good being considered, and the prices must be fixed
so the decision is not clouded by things like quantity discounts, price changes, negotiation, and
so on.
QUESTION: Consider the concept of the production possibility frontier and a limited budget in
regard to a model, chart, or graph.
What happens as a consumer decreases spending on one of two choices?
Due to budget constraints, the consumer has less surplus.
The consumer has less money to spend on the other item.
The consumer has more money to spend on the other item.
Due to consumer surplus, the person now has an unlimited budget. - ANSWER-The consumer
has more money to spend on the other item.
Spending less on one item makes more money available for the other item.
QUESTION: Just like budget constraints that can be observed when trade-offs are applied
between two items for an individual, companies that use the production possibility frontier
model also use certain assumptions to simplify the analysis.
What is one of the assumptions?
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Technology is always changing.
No resources are wasted.
Resources are infinite.
Any good can be produced. - ANSWER-No resources are wasted.
QUESTION: A seller has 10 hours to either bake cakes or make holiday ornaments to sell at the
local farmers market. The seller is currently producing at a point on their production possibility
frontier.
Which decision is both attainable and efficient?
Producing more of both goods simultaneously
Producing less of one good and the same quantity of the other good
Producing less of one good and more of the other good
Producing more of one good and the same quantity of the other good - ANSWER-Producing less
of one good and more of the other good
Correct! This is the correct mix that is both attainable and efficient.
QUESTION: A country is producing on its production possibility frontier (PPF) with respect to
capital and consumption goods. Policy makers are considering policies to help the country grow
and produce combinations of goods that it currently finds unattainable.
Which policy will be successful in meeting this goal?
Requiring that only government-approved technology is used in the production process
Increasing skilled labor in public and private sectors through relaxed immigration laws
Restricting access to labor markets to only the highly productive people in the population
Improving equity by redistributing income from nonlabor resource owners to labor - ANSWER-
Increasing skilled labor in public and private sectors through relaxed immigration laws
Correct! This situation would lead to a larger labor force and shift out the PPF. This would allow
the country to grow and produce at points that currently represent unattainable combinations
of goods as the PPF shifts out.
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QUESTION: A country has a recent innovation in energy production that is leading to low cost
renewable energy.
What will happen to this country's production of both capital and consumption goods?
There will be a movement on the country's production possibility frontier towards consumption
goods.
There will be a movement on the country's production possibility frontier towards capital
goods.
Its production possibility frontier will shift out, and more combinations of goods will be
attainable.
Its production possibility frontier will shift in, and less combinations of goods will be attainable.
- ANSWER-Its production possibility frontier will shift out, and more combinations of goods will
be attainable.
Correct! This is the response that occurs when an innovation in energy production leads to low
cost and renewable energy for businesses.
QUESTION: - ANSWER-Take a break
QUESTION: Which statement accurately illustrates the condition of people who are very rich
and those who are very poor in relation to scarcity?
The very rich will be able to buy what they want, so they are unlikely to face scarcity.
Both the very rich and the very poor must make trade-offs because of scarcity.
The very rich will not face scarcity, while those who are very poor will have problems.
The redistribution of money from the very rich to the very poor will eliminate scarcity. -
ANSWER-Both the very rich and the very poor must make trade-offs because of scarcity.
Correct! Both groups will still need to make trade-offs due to scarcity. This is a factor that does
not change with income.
QUESTION: Which characteristic of the production possibility frontier is most directly related to
scarcity?
The U-curve showing that goods are attainable but not efficient
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The downward (negative) slope of the frontier
The upward (positive) slope of the frontier
The convex or bowed in shape of the frontier - ANSWER-The downward (negative) slope of the
frontier
Correct! This profile is seen during scarcity.
QUESTION: A small business owner wants to add a new product to its current product line, but
the business can only produce 10% of what it wants.
What describes this scarcity situation?
Scarcity will not be an issue because the business did not commit to any trade-off with its
current production line.
To increase production of the new good, a trade-off is necessary given the available resources
and their current production possibilities frontier.
The business is demonstrating that it is currently underutilizing its resources and as such is not
experiencing any scarcity.
Scarcity will not be an issue because of the firm's chosen mix of new and current products
produced on its production possibilities frontier. - ANSWER-To increase production of the new
good, a trade-off is necessary given the available resources and their current production
possibilities frontier.
Correct! The scenario implies that the firm is constrained in the amount of its new product that
it can produce by its current resources, so a trade-off is necessary because of scarcity.
QUESTION: A country is producing capital and consumption goods, and its resources and
technology are fixed in quantity and quality. The country wants to expand production of both
capital and consumption goods without changing its resources or technology.
When is this goal possible?
It is possible if there are underutilized resources, so the production point moves to the frontier.
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