1
WGU
WGU C718 VOCABULARY EXAM QUESTIONS
AND ANSWERS UPDATED (2024/2025)
(VERIFIED ANSWERS)
factors of production - ANS ✓the resources available to the economy for the
production of goods and services (Land, Labour, Capital, and Entrepreneurship)
fallacy of false cause - ANS ✓the incorrect assumption that one event causes
another because the two events tend to occur together
financial capital - ANS ✓includes money and other "paper" assets (such as
stocks and bonds)
firms - ANS ✓organizations that produce goods and services
fixed costs - ANS ✓the costs associated with the use of fixed factors of
production (lease on building, payments for equipment, insurance premiums,
etc)
fixed factor of production - ANS ✓a factor of production whose quantity cannot
be changed during a particular period (building size, number of machines, etc.)
game theory - ANS ✓an analytical approach where we examine strategic choices
goods and services market - ANS ✓a market in which firms are sellers of what
they produce and households are buyers
WGU C718
, 2
WGU
graph - ANS ✓a pictorial representation of the relationship between two or
more variables
Herfindahl Hirschman index (hhi) - ANS ✓an alternative measure of
concentration calculated by squaring the percentage share (after dropping the %
sign) of each firm in an industry, then summing these squared market shares
(helps determine if a market is an oligopoly or monopolistic competition)
human capital - ANS ✓the skills a worker has as a result of education, training,
or experience that can be used in production
imperfect information - ANS ✓a situation where the buyer and the seller are
uncertain about the qualities of what is being bought and sold
implicit costs - ANS ✓money that could have been earned if the factors of
production had been used in a different way (foregone wages or interest, for
example)
income effect - ANS ✓when the price of a good changes and consumers feel
more or less wealthy as a result. This means they will buy more of all goods if
they feel wealthier because of a price decrease or less of all goods if they feel
wealthier because of a price increase.
income elasticity of demand - ANS ✓Tells us if goods are normal or inferior
goods. The percentage change in quantity demanded at a specific price divided
by the percentage change in income. Positive sign means normal goods and
negative sign means inferior goods.
WGU C718
, 3
WGU
income-compensated price change - ANS ✓an imaginary exercise in which you
assume that when the price of a good or service changes, the consumer's income
is adjusted so that he or she has just enough to purchase the original combination
of goods and services at the new set of prices
increasing marginal returns - ANS ✓when the next worker hired has a higher
marginal product than the previous worker hired
indifference curve - ANS ✓A curve that shows combinations of two goods that
yield equal levels of utility. The consumer gets the same amount of utility from all
points along an indifference curve.
inferior good - ANS ✓a good for which demand decreases when income
increases
labor - ANS ✓the human effort that can be applied to the production of goods
and services (workers working)
law of demand - ANS ✓A higher price leads to a decrease in QUANTITY
demanded and a lower price leads to an increase in QUANTITY demanded (when
the price goes up people want to buy less, when the price goes down people want
to buy more - it's a change in quantity demanded)
law of diminishing marginal returns - ANS ✓anytime there are both fixed and
variable inputs, eventually the marginal product will decrease as the variable
input overruns the fixed input (too many cooks in a kitchen will get in each
other's way - the next cook hired will have lower marginal product than the one
hired before)
WGU C718
WGU
WGU C718 VOCABULARY EXAM QUESTIONS
AND ANSWERS UPDATED (2024/2025)
(VERIFIED ANSWERS)
factors of production - ANS ✓the resources available to the economy for the
production of goods and services (Land, Labour, Capital, and Entrepreneurship)
fallacy of false cause - ANS ✓the incorrect assumption that one event causes
another because the two events tend to occur together
financial capital - ANS ✓includes money and other "paper" assets (such as
stocks and bonds)
firms - ANS ✓organizations that produce goods and services
fixed costs - ANS ✓the costs associated with the use of fixed factors of
production (lease on building, payments for equipment, insurance premiums,
etc)
fixed factor of production - ANS ✓a factor of production whose quantity cannot
be changed during a particular period (building size, number of machines, etc.)
game theory - ANS ✓an analytical approach where we examine strategic choices
goods and services market - ANS ✓a market in which firms are sellers of what
they produce and households are buyers
WGU C718
, 2
WGU
graph - ANS ✓a pictorial representation of the relationship between two or
more variables
Herfindahl Hirschman index (hhi) - ANS ✓an alternative measure of
concentration calculated by squaring the percentage share (after dropping the %
sign) of each firm in an industry, then summing these squared market shares
(helps determine if a market is an oligopoly or monopolistic competition)
human capital - ANS ✓the skills a worker has as a result of education, training,
or experience that can be used in production
imperfect information - ANS ✓a situation where the buyer and the seller are
uncertain about the qualities of what is being bought and sold
implicit costs - ANS ✓money that could have been earned if the factors of
production had been used in a different way (foregone wages or interest, for
example)
income effect - ANS ✓when the price of a good changes and consumers feel
more or less wealthy as a result. This means they will buy more of all goods if
they feel wealthier because of a price decrease or less of all goods if they feel
wealthier because of a price increase.
income elasticity of demand - ANS ✓Tells us if goods are normal or inferior
goods. The percentage change in quantity demanded at a specific price divided
by the percentage change in income. Positive sign means normal goods and
negative sign means inferior goods.
WGU C718
, 3
WGU
income-compensated price change - ANS ✓an imaginary exercise in which you
assume that when the price of a good or service changes, the consumer's income
is adjusted so that he or she has just enough to purchase the original combination
of goods and services at the new set of prices
increasing marginal returns - ANS ✓when the next worker hired has a higher
marginal product than the previous worker hired
indifference curve - ANS ✓A curve that shows combinations of two goods that
yield equal levels of utility. The consumer gets the same amount of utility from all
points along an indifference curve.
inferior good - ANS ✓a good for which demand decreases when income
increases
labor - ANS ✓the human effort that can be applied to the production of goods
and services (workers working)
law of demand - ANS ✓A higher price leads to a decrease in QUANTITY
demanded and a lower price leads to an increase in QUANTITY demanded (when
the price goes up people want to buy less, when the price goes down people want
to buy more - it's a change in quantity demanded)
law of diminishing marginal returns - ANS ✓anytime there are both fixed and
variable inputs, eventually the marginal product will decrease as the variable
input overruns the fixed input (too many cooks in a kitchen will get in each
other's way - the next cook hired will have lower marginal product than the one
hired before)
WGU C718
