WGU D089 - PRINCIPLES OF
ECONOMICS 2025-2026 TEST BANK
EXAM COMPLETE QUESTIONS AND
CORRECT DETAILED ANSWERS | A+
GRADE VERIFIED ANSWERS
Which market failure is overcome by a money-back
guarantee strategy using mail-order catalogs? Correct
Answer Imperfect information
Correct! A money-back guarantee helps instill confidence
in the buyer about the quality of the product by refunding
purchase price if the buyer is dissatisfied.
Why do high labor-cost countries typically have more
capital than low labor-cost countries? Correct Answer
Firms choose technology that requires more capital than
labor to offset higher labor costs.
Correct! Firms minimize costs by choosing a mix of inputs
according to their relative cost. Firms operating in high
labor cost countries will use more capital than firms
operating in low labor cost countries.
A bakery operates in an industry with many competitors
and easy entry and exit. The firms in the industry are price
takers. What is the price elasticity of demand for the
bakery's bread? Correct Answer Perfectly elastic
Correct! In a perfectly competitive market, the price
elasticity of demand is infinite
,A firm is operating in an environment with other firms who
differentiate their products with advertisements. The firm
finds that its long-run economic profits equal zero. Which
market environment is this firm operating in? Correct
Answer Monopolistic competition
Correct! Consumers view products of firms in a
monopolistic competitive market environment as close
substitutes with some differentiation between competitors'
products. This enables them to have some market power,
but not enough to prevent driving long-run economic profit
to zero.
The market share of the top four firms was measured, and
the concentration ratio score indicated that a proposed
merger would draw the attention of anti-trust authorities.
Which concentration ratio score was calculated? Correct
Answer 58%
Correct! A concentration ratio score of more than 50%
would be considered especially high and would draw the
attention of antitrust authorities.
Who is included in the labor force participation rate?
Correct Answer Employed persons plus those who are
unemployed and actively seeking a job
Correct! The labor force participation rate is the fraction of
people who are either employed or active job seekers.
Which element is included in the calculation for
government spending as a component of gross domestic
,product (GDP)? Correct Answer New highway
construction
Correct! Building a new highway is considered a good or
service expenditure for the calculation of GDP.
Nominal wages increase across the country. How does
this change the short-run aggregate supply (SRAS) curve?
Correct Answer The curve shifts to the left.
Correct! An increase in the cost of labor will cause the
curve to shift to the left since labor is a key input for other
products.
A new immigration policy has increased the number of
skilled immigrants who can legally come to the country,
and this increases the economy's productivity.
How will the long-run aggregate supply (LRAS) curve
respond to this situation? Correct Answer Shifts to the
right
Correct! Increase in productivity shifts the LRAS curve to
the right.
A country's interest rates have fallen. How will this change
affect the equilibrium? Correct Answer The new
equilibrium occurs at a higher price and higher GDP.
Correct! If interest rates fall, the aggregate demand shifts
to the right, so the new equilibrium occurs at a higher GDP
and higher price.
What are the largest areas of government spending?
Correct Answer Entitlements and mandatory spending
, Correct! Entitlements and other mandatory spending
compose about two-thirds of government spending.
Which description characterizes the national debt? Correct
Answer Sum of all past national deficits minus any
surpluses
Correct! National debt includes all past national deficits
minus any surpluses that occurred.
What is a disadvantage of exporting goods and services to
other countries? Correct Answer Exports potentially add
another layer in the chain of distribution through
wholesalers.
Correct! Wholesalers, importing companies, and other
intermediaries are part of international trade distribution
chains. Their existence facilitates trade across borders but
adds costs to international trade transactions.
New labor laws were recently passed in Mexico making
wages in Mexico closer to wages in the United States.
Currently, the United States imports more from Mexico
than it exports to Mexico. What is the effect of this
situation on Mexico-U.S. trade flows? Correct Answer It
will decrease Mexican exports, which will reduce U.S.
negative trade balance with Mexico.
Correct! Higher relative wages in Mexico will increase the
cost of Mexican imports in the U.S. At the same time, U.S.
exports to Mexico will remain constant or become more
attractive to people in Mexico who earn higher wages.
ECONOMICS 2025-2026 TEST BANK
EXAM COMPLETE QUESTIONS AND
CORRECT DETAILED ANSWERS | A+
GRADE VERIFIED ANSWERS
Which market failure is overcome by a money-back
guarantee strategy using mail-order catalogs? Correct
Answer Imperfect information
Correct! A money-back guarantee helps instill confidence
in the buyer about the quality of the product by refunding
purchase price if the buyer is dissatisfied.
Why do high labor-cost countries typically have more
capital than low labor-cost countries? Correct Answer
Firms choose technology that requires more capital than
labor to offset higher labor costs.
Correct! Firms minimize costs by choosing a mix of inputs
according to their relative cost. Firms operating in high
labor cost countries will use more capital than firms
operating in low labor cost countries.
A bakery operates in an industry with many competitors
and easy entry and exit. The firms in the industry are price
takers. What is the price elasticity of demand for the
bakery's bread? Correct Answer Perfectly elastic
Correct! In a perfectly competitive market, the price
elasticity of demand is infinite
,A firm is operating in an environment with other firms who
differentiate their products with advertisements. The firm
finds that its long-run economic profits equal zero. Which
market environment is this firm operating in? Correct
Answer Monopolistic competition
Correct! Consumers view products of firms in a
monopolistic competitive market environment as close
substitutes with some differentiation between competitors'
products. This enables them to have some market power,
but not enough to prevent driving long-run economic profit
to zero.
The market share of the top four firms was measured, and
the concentration ratio score indicated that a proposed
merger would draw the attention of anti-trust authorities.
Which concentration ratio score was calculated? Correct
Answer 58%
Correct! A concentration ratio score of more than 50%
would be considered especially high and would draw the
attention of antitrust authorities.
Who is included in the labor force participation rate?
Correct Answer Employed persons plus those who are
unemployed and actively seeking a job
Correct! The labor force participation rate is the fraction of
people who are either employed or active job seekers.
Which element is included in the calculation for
government spending as a component of gross domestic
,product (GDP)? Correct Answer New highway
construction
Correct! Building a new highway is considered a good or
service expenditure for the calculation of GDP.
Nominal wages increase across the country. How does
this change the short-run aggregate supply (SRAS) curve?
Correct Answer The curve shifts to the left.
Correct! An increase in the cost of labor will cause the
curve to shift to the left since labor is a key input for other
products.
A new immigration policy has increased the number of
skilled immigrants who can legally come to the country,
and this increases the economy's productivity.
How will the long-run aggregate supply (LRAS) curve
respond to this situation? Correct Answer Shifts to the
right
Correct! Increase in productivity shifts the LRAS curve to
the right.
A country's interest rates have fallen. How will this change
affect the equilibrium? Correct Answer The new
equilibrium occurs at a higher price and higher GDP.
Correct! If interest rates fall, the aggregate demand shifts
to the right, so the new equilibrium occurs at a higher GDP
and higher price.
What are the largest areas of government spending?
Correct Answer Entitlements and mandatory spending
, Correct! Entitlements and other mandatory spending
compose about two-thirds of government spending.
Which description characterizes the national debt? Correct
Answer Sum of all past national deficits minus any
surpluses
Correct! National debt includes all past national deficits
minus any surpluses that occurred.
What is a disadvantage of exporting goods and services to
other countries? Correct Answer Exports potentially add
another layer in the chain of distribution through
wholesalers.
Correct! Wholesalers, importing companies, and other
intermediaries are part of international trade distribution
chains. Their existence facilitates trade across borders but
adds costs to international trade transactions.
New labor laws were recently passed in Mexico making
wages in Mexico closer to wages in the United States.
Currently, the United States imports more from Mexico
than it exports to Mexico. What is the effect of this
situation on Mexico-U.S. trade flows? Correct Answer It
will decrease Mexican exports, which will reduce U.S.
negative trade balance with Mexico.
Correct! Higher relative wages in Mexico will increase the
cost of Mexican imports in the U.S. At the same time, U.S.
exports to Mexico will remain constant or become more
attractive to people in Mexico who earn higher wages.
