WGU D089 Principles of Economics
ACTUAL EXAM 2026/2027 |
Pre-Assessment INO1/PINO Review | 70
Questions | Verified Q&A | Pass
Guaranteed - A+ Graded
COMPETENCY 1: SCARCITY AND ECONOMIC SYSTEMS (10
Questions)
Q1: Scarcity exists because:
A. Human wants are limited while resources are unlimited
B. Resources are limited while human wants are unlimited [CORRECT]
C. Government policies restrict production
D. Technology has not advanced sufficiently
Correct Answer: B
Rationale: Scarcity is the fundamental economic problem that arises because society has
unlimited wants but limited resources to satisfy those wants. This imbalance forces choices
about resource allocation. Option A reverses the relationship. Options C and D describe
specific constraints but not the root cause of scarcity.
WGU Note: Understanding scarcity is foundational to D089—every economic decision stems
from this concept. Pre-assessments often test this definition directly.
Q2: A student spends 4 hours studying for an economics exam instead of working at a
part-time job that pays $15/hour. The opportunity cost of studying is:
A. The exam grade earned
B. $60 in foregone wages [CORRECT]
C. The value of the economics knowledge gained
D. $0 since studying is an investment
Correct Answer: B
,Rationale: Opportunity cost is the value of the next-best alternative foregone. By choosing to
study, the student gives up 4 hours × $15/hour = $60 in wages. While the exam grade and
knowledge gained are benefits of the choice, they are not the opportunity cost. Option D
incorrectly assumes investment has no cost.
Q3: On a Production Possibilities Curve (PPC), a point inside the curve represents:
A. Economic growth
B. Unattainable production combinations
C. Inefficient use of resources [CORRECT]
D. Full employment of resources
Correct Answer: C
Rationale: The PPC illustrates maximum output combinations given resources and
technology. Points on the curve represent efficient, full-employment output. Points inside
indicate inefficiency or unemployment (resources not fully utilized). Points outside are
unattainable with current resources. Economic growth shifts the entire curve outward.
Q4: The slope of the Production Possibilities Curve demonstrates:
A. The law of increasing opportunity cost [CORRECT]
B. Constant returns to scale
C. Diminishing marginal utility
D. Comparative advantage
Correct Answer: A
Rationale: The PPC is typically bowed outward (concave to origin), illustrating increasing
opportunity cost—as you produce more of one good, you must give up increasingly larger
amounts of the other. This occurs because resources are not perfectly adaptable to both
uses. A straight-line PPC would show constant opportunity cost.
Q5: Which of the following is NOT a factor of production?
A. Land
B. Labor
C. Money [CORRECT]
D. Entrepreneurship
Correct Answer: C
Rationale: The four factors of production are land (natural resources), labor (human effort),
capital (manufactured tools/equipment), and entrepreneurship (risk-taking and innovation).
, Money is a medium of exchange, not a productive resource itself. While money facilitates
transactions, it doesn't directly produce goods and services.
Q6: In a command economic system:
A. Private individuals own the means of production
B. Market forces determine prices and output
C. Central government makes resource allocation decisions [CORRECT]
D. Consumer sovereignty guides production choices
Correct Answer: C
Rationale: Command (planned) economies feature government ownership of resources and
centralized decision-making about what, how, and for whom to produce. Options A, B, and D
describe market economy characteristics. Most modern economies are mixed, incorporating
elements of both systems.
Q7: Marginal analysis involves examining:
A. Total costs versus total benefits
B. Additional costs versus additional benefits of one more unit [CORRECT]
C. Average costs over all units produced
D. Sunk costs from past decisions
Rationale: Marginal means "additional" or "incremental." Rational decision-makers use
marginal analysis by comparing marginal benefit (MB) to marginal cost (MC). If MB > MC, the
activity should expand. This principle applies to consumption, production, and policy
decisions. Sunk costs (option D) are irrelevant to marginal decisions.
Q8: When an economy moves from a point inside its PPC to a point on the PPC:
A. Economic growth has occurred
B. Resources have become more scarce
C. Efficiency has improved [CORRECT]
D. Opportunity cost has decreased
Correct Answer: C
Rationale: Moving from inside to on the PPC represents achieving full employment and
productive efficiency—using all resources to their maximum potential without waste.
Economic growth (A) would shift the curve outward. This movement actually involves
incurring opportunity costs (giving up leisure/unemployment) rather than decreasing them.
ACTUAL EXAM 2026/2027 |
Pre-Assessment INO1/PINO Review | 70
Questions | Verified Q&A | Pass
Guaranteed - A+ Graded
COMPETENCY 1: SCARCITY AND ECONOMIC SYSTEMS (10
Questions)
Q1: Scarcity exists because:
A. Human wants are limited while resources are unlimited
B. Resources are limited while human wants are unlimited [CORRECT]
C. Government policies restrict production
D. Technology has not advanced sufficiently
Correct Answer: B
Rationale: Scarcity is the fundamental economic problem that arises because society has
unlimited wants but limited resources to satisfy those wants. This imbalance forces choices
about resource allocation. Option A reverses the relationship. Options C and D describe
specific constraints but not the root cause of scarcity.
WGU Note: Understanding scarcity is foundational to D089—every economic decision stems
from this concept. Pre-assessments often test this definition directly.
Q2: A student spends 4 hours studying for an economics exam instead of working at a
part-time job that pays $15/hour. The opportunity cost of studying is:
A. The exam grade earned
B. $60 in foregone wages [CORRECT]
C. The value of the economics knowledge gained
D. $0 since studying is an investment
Correct Answer: B
,Rationale: Opportunity cost is the value of the next-best alternative foregone. By choosing to
study, the student gives up 4 hours × $15/hour = $60 in wages. While the exam grade and
knowledge gained are benefits of the choice, they are not the opportunity cost. Option D
incorrectly assumes investment has no cost.
Q3: On a Production Possibilities Curve (PPC), a point inside the curve represents:
A. Economic growth
B. Unattainable production combinations
C. Inefficient use of resources [CORRECT]
D. Full employment of resources
Correct Answer: C
Rationale: The PPC illustrates maximum output combinations given resources and
technology. Points on the curve represent efficient, full-employment output. Points inside
indicate inefficiency or unemployment (resources not fully utilized). Points outside are
unattainable with current resources. Economic growth shifts the entire curve outward.
Q4: The slope of the Production Possibilities Curve demonstrates:
A. The law of increasing opportunity cost [CORRECT]
B. Constant returns to scale
C. Diminishing marginal utility
D. Comparative advantage
Correct Answer: A
Rationale: The PPC is typically bowed outward (concave to origin), illustrating increasing
opportunity cost—as you produce more of one good, you must give up increasingly larger
amounts of the other. This occurs because resources are not perfectly adaptable to both
uses. A straight-line PPC would show constant opportunity cost.
Q5: Which of the following is NOT a factor of production?
A. Land
B. Labor
C. Money [CORRECT]
D. Entrepreneurship
Correct Answer: C
Rationale: The four factors of production are land (natural resources), labor (human effort),
capital (manufactured tools/equipment), and entrepreneurship (risk-taking and innovation).
, Money is a medium of exchange, not a productive resource itself. While money facilitates
transactions, it doesn't directly produce goods and services.
Q6: In a command economic system:
A. Private individuals own the means of production
B. Market forces determine prices and output
C. Central government makes resource allocation decisions [CORRECT]
D. Consumer sovereignty guides production choices
Correct Answer: C
Rationale: Command (planned) economies feature government ownership of resources and
centralized decision-making about what, how, and for whom to produce. Options A, B, and D
describe market economy characteristics. Most modern economies are mixed, incorporating
elements of both systems.
Q7: Marginal analysis involves examining:
A. Total costs versus total benefits
B. Additional costs versus additional benefits of one more unit [CORRECT]
C. Average costs over all units produced
D. Sunk costs from past decisions
Rationale: Marginal means "additional" or "incremental." Rational decision-makers use
marginal analysis by comparing marginal benefit (MB) to marginal cost (MC). If MB > MC, the
activity should expand. This principle applies to consumption, production, and policy
decisions. Sunk costs (option D) are irrelevant to marginal decisions.
Q8: When an economy moves from a point inside its PPC to a point on the PPC:
A. Economic growth has occurred
B. Resources have become more scarce
C. Efficiency has improved [CORRECT]
D. Opportunity cost has decreased
Correct Answer: C
Rationale: Moving from inside to on the PPC represents achieving full employment and
productive efficiency—using all resources to their maximum potential without waste.
Economic growth (A) would shift the curve outward. This movement actually involves
incurring opportunity costs (giving up leisure/unemployment) rather than decreasing them.
