D089 ECON 2000
Principles of Economics
OBJECTIVE ASSESSMENT GUIDE
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,1. Question: In the context of Perfect Competition Market
Structure, the firm's short-run supply curve is:
a) The marginal cost curve above the average variable cost curve.
b) The marginal cost curve above the average total cost curve.
c) The average total cost curve above the average fixed cost curve.
d) The marginal revenue curve above the average variable cost
curve.
Answer: a) The marginal cost curve above the average
variable cost curve.
Rationale: In perfect competition, the firm’s short-run supply
curve corresponds to its marginal cost curve above the AVC
because it will produce only if it can cover all variable costs.
2. Question: Which of the following represents an example of a
negative externality?
a) Vaccination of children.
b) Planting trees in a community garden.
c) Smoking in public places.
d) Consuming a public good.
© WGU 2024/2025
, Answer: c) Smoking in public places.
Rationale: Negative externalities occur when the actions of
individuals or firms result in harmful effects on third parties; public
smoking affects non-smokers.
3. Question: Which of the following markets is characterized by
a single seller and high barriers to entry?
a) Monopolistic Competition
b) Oligopoly
c) Perfect Competition
d) Monopoly
Answer: d) Monopoly
Rationale: A monopoly exists where there is only one seller in
the market, and there are considerable barriers preventing other
firms from entering.
4. Question: The concept of "consumer surplus" can be best
described as:
a) The total revenue gained from selling a product.
b) The difference between what consumers are willing to pay and
what they actually pay.
c) The profit made by firms in the market.
© WGU 2024/2025
Principles of Economics
OBJECTIVE ASSESSMENT GUIDE
© WGU 2024/2025
,1. Question: In the context of Perfect Competition Market
Structure, the firm's short-run supply curve is:
a) The marginal cost curve above the average variable cost curve.
b) The marginal cost curve above the average total cost curve.
c) The average total cost curve above the average fixed cost curve.
d) The marginal revenue curve above the average variable cost
curve.
Answer: a) The marginal cost curve above the average
variable cost curve.
Rationale: In perfect competition, the firm’s short-run supply
curve corresponds to its marginal cost curve above the AVC
because it will produce only if it can cover all variable costs.
2. Question: Which of the following represents an example of a
negative externality?
a) Vaccination of children.
b) Planting trees in a community garden.
c) Smoking in public places.
d) Consuming a public good.
© WGU 2024/2025
, Answer: c) Smoking in public places.
Rationale: Negative externalities occur when the actions of
individuals or firms result in harmful effects on third parties; public
smoking affects non-smokers.
3. Question: Which of the following markets is characterized by
a single seller and high barriers to entry?
a) Monopolistic Competition
b) Oligopoly
c) Perfect Competition
d) Monopoly
Answer: d) Monopoly
Rationale: A monopoly exists where there is only one seller in
the market, and there are considerable barriers preventing other
firms from entering.
4. Question: The concept of "consumer surplus" can be best
described as:
a) The total revenue gained from selling a product.
b) The difference between what consumers are willing to pay and
what they actually pay.
c) The profit made by firms in the market.
© WGU 2024/2025
