WGU D089 – Principles of Economics Objective Assessment (OA) | Questions
and Answers | 2026/27 Updates | 100% correct
1. What is the basic economic problem that forces societies to make choices about
production and consumption?
A. Inflation
B. Unemployment
C. Scarcity
D. Inequality
Correct Answer: C
Rationale: Scarcity is the fundamental economic problem—the gap between limited,
scarce resources and theoretically limitless human wants . Because resources are finite
while desires are infinite, every society must make choices about what to produce, how
to produce it, and for whom to produce it . Inflation (A), unemployment (B), and
inequality (D) are economic issues that arise from scarcity but are not the basic problem
itself.
2. A student decides to study for an extra hour instead of going to a movie. The
enjoyment from the movie that the student gives up is an example of:
A. Marginal benefit
B. Sunk cost
C. Opportunity cost
D. Fixed cost
Correct Answer: C
Rationale: Opportunity cost is the value of the next best alternative that is given up
when a choice is made . Here, the movie's enjoyment is the forgone alternative.
Marginal benefit (A) refers to the additional gain from one more unit. Sunk costs (B) are
unrecoverable past expenses. Fixed costs (D) do not vary with production or decision
levels.
,3. Which branch of economics studies the behavior of individual households and firms
making decisions about allocating scarce resources?
A. Macroeconomics
B. Positive economics
C. Normative economics
D. Microeconomics
Correct Answer: D
Rationale: Microeconomics studies the behavior of individuals and firms in making
decisions regarding the allocation of scarce resources and the interactions among these
individuals and firms . Macroeconomics (A) deals with economy-wide phenomena such
as inflation, unemployment, and GDP. Positive economics (B) describes "what is," while
normative economics (C) prescribes "what ought to be."
4. According to the ten principles of economics, what is the first principle?
A. People respond to incentives
B. Everyone faces trade-offs
C. Trade can benefit everyone
D. Markets are a sound method of organizing economic activity
Correct Answer: B
Rationale: The first principle of economics is that everyone faces trade-offs. Because of
scarcity, individuals, businesses, and governments must constantly make choices, giving
up one thing to obtain another . The other options are also valid principles but
represent different positions in the list: people respond to incentives (4th), trade can
benefit everyone (5th), and markets are sound (6th) .
5. Which principle of economics explains why a government might impose a tax on
cigarettes to reduce smoking?
A. People respond to incentives
B. Printing too much money causes prices to rise
C. There is a short-run trade-off between inflation and unemployment
D. A nation's standard of living depends on its ability to produce
, Correct Answer: A
Rationale: The fourth principle states that people respond to incentives. When the
government imposes a tax on cigarettes, it increases the price, creating a disincentive to
purchase them . Higher prices lead to lower quantity demanded, reducing smoking
rates. The other principles address inflation, the Phillips curve trade-off, and productivity,
respectively.
6. Which principle of economics states that a country's standard of living depends on its
ability to produce goods and services?
A. Markets are a sound method of organizing economic activity
B. Governments may be able to improve market outcomes
C. A nation's standard of living depends on its ability to produce
D. Printing too much money causes prices to rise
Correct Answer: C
Rationale: The eighth principle directly states that a nation's standard of living depends
on its ability to produce goods and services . Productivity—the quantity of goods and
services produced per unit of labor input—is the primary determinant of living
standards. Nations with higher productivity enjoy higher real incomes and better access
to goods, services, and healthcare.
7. What does the ninth principle of economics state about printing money?
A. Printing money stimulates long-term economic growth
B. Printing money has no effect on the economy
C. Printing too much money causes prices to rise (inflation)
D. Printing money reduces unemployment permanently
Correct Answer: C
Rationale: The ninth principle states that printing too much money causes prices to
rise . When a government increases the money supply faster than economic output
grows, each unit of currency buys fewer goods—resulting in inflation. While short-term
effects on output may occur, excessive money creation ultimately manifests as higher
prices, not permanent growth.
and Answers | 2026/27 Updates | 100% correct
1. What is the basic economic problem that forces societies to make choices about
production and consumption?
A. Inflation
B. Unemployment
C. Scarcity
D. Inequality
Correct Answer: C
Rationale: Scarcity is the fundamental economic problem—the gap between limited,
scarce resources and theoretically limitless human wants . Because resources are finite
while desires are infinite, every society must make choices about what to produce, how
to produce it, and for whom to produce it . Inflation (A), unemployment (B), and
inequality (D) are economic issues that arise from scarcity but are not the basic problem
itself.
2. A student decides to study for an extra hour instead of going to a movie. The
enjoyment from the movie that the student gives up is an example of:
A. Marginal benefit
B. Sunk cost
C. Opportunity cost
D. Fixed cost
Correct Answer: C
Rationale: Opportunity cost is the value of the next best alternative that is given up
when a choice is made . Here, the movie's enjoyment is the forgone alternative.
Marginal benefit (A) refers to the additional gain from one more unit. Sunk costs (B) are
unrecoverable past expenses. Fixed costs (D) do not vary with production or decision
levels.
,3. Which branch of economics studies the behavior of individual households and firms
making decisions about allocating scarce resources?
A. Macroeconomics
B. Positive economics
C. Normative economics
D. Microeconomics
Correct Answer: D
Rationale: Microeconomics studies the behavior of individuals and firms in making
decisions regarding the allocation of scarce resources and the interactions among these
individuals and firms . Macroeconomics (A) deals with economy-wide phenomena such
as inflation, unemployment, and GDP. Positive economics (B) describes "what is," while
normative economics (C) prescribes "what ought to be."
4. According to the ten principles of economics, what is the first principle?
A. People respond to incentives
B. Everyone faces trade-offs
C. Trade can benefit everyone
D. Markets are a sound method of organizing economic activity
Correct Answer: B
Rationale: The first principle of economics is that everyone faces trade-offs. Because of
scarcity, individuals, businesses, and governments must constantly make choices, giving
up one thing to obtain another . The other options are also valid principles but
represent different positions in the list: people respond to incentives (4th), trade can
benefit everyone (5th), and markets are sound (6th) .
5. Which principle of economics explains why a government might impose a tax on
cigarettes to reduce smoking?
A. People respond to incentives
B. Printing too much money causes prices to rise
C. There is a short-run trade-off between inflation and unemployment
D. A nation's standard of living depends on its ability to produce
, Correct Answer: A
Rationale: The fourth principle states that people respond to incentives. When the
government imposes a tax on cigarettes, it increases the price, creating a disincentive to
purchase them . Higher prices lead to lower quantity demanded, reducing smoking
rates. The other principles address inflation, the Phillips curve trade-off, and productivity,
respectively.
6. Which principle of economics states that a country's standard of living depends on its
ability to produce goods and services?
A. Markets are a sound method of organizing economic activity
B. Governments may be able to improve market outcomes
C. A nation's standard of living depends on its ability to produce
D. Printing too much money causes prices to rise
Correct Answer: C
Rationale: The eighth principle directly states that a nation's standard of living depends
on its ability to produce goods and services . Productivity—the quantity of goods and
services produced per unit of labor input—is the primary determinant of living
standards. Nations with higher productivity enjoy higher real incomes and better access
to goods, services, and healthcare.
7. What does the ninth principle of economics state about printing money?
A. Printing money stimulates long-term economic growth
B. Printing money has no effect on the economy
C. Printing too much money causes prices to rise (inflation)
D. Printing money reduces unemployment permanently
Correct Answer: C
Rationale: The ninth principle states that printing too much money causes prices to
rise . When a government increases the money supply faster than economic output
grows, each unit of currency buys fewer goods—resulting in inflation. While short-term
effects on output may occur, excessive money creation ultimately manifests as higher
prices, not permanent growth.
