D089 Principles of Economics Comprehensive Review Guide for

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pg. 1 D089 Principles of Economics Comprehensive Review Guide for OA and Pre-assessment Prep – Questions Compiled from Modules 1-10 | 2025 WGU D089 OA Practice Test Module 1 – The Economic Way of Thinking

• What are the three fundamental questions every economy must answer? Give an example of a

“What” question.

• What to Produce
• How to produce it
• Who to produce it for

• What do economists mean when they say that people “think at the margin”?
• They weight the cost and benefits of all options when making decisions

• According to the 10 Principles of Economics, what determines a nation’s standard of living?
• Standard of living is determined by a nations ability to produce goods and services
• Using the 10 Principles of Economics, explain why trade is beneficial?
• How does printing money impact prices?
• Printing too much money causes pric
• What are the differences between the Traditional and the Market economy?
• Traditional economy – Decisions are based on traditions, beliefs and customs
• Maret - Businesses make decisions in response to consumer demand
• Identify two disadvantages of a Command economy?
• Discourages innovation

b.

• Explain one of the advantages of the Mixed economy?
• Innovation is rewarded
• How are macroeconomics and microeconomics different?
• Microeconomics – focuses on the behavior of individuals and firms in the economy
• Macroeconomics – Focuses on the behavior and performance of the overall economy
• Give an example of a normative statement.
• A opinion

• Identify the payment that goes to each of the four factors of production.
• Land – Receives rent
• Labor - wages
• Capital – Interest
• Entrepreneurship – Normal profit 1 / 3

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• What does the circular flow diagram depict?

Module 2 – The Economic Problem

• Why is the concept of scarcity so important in economics?
• Limited resources vs. Unlimited wants

• What does an individual’s budget constraint identify?
• consumption
• Identify two ways in which the budget constraint and the PPF are similar and two ways in which

they are different.

• Using the graph below, explain the trade-off associated with a movement from Point A to Point

B.

• To produce more automobiles we must produce less airplanes

• Using the graph above, explain why there is no trade-off associated with the movement from

Point C to Point B.

• Point C is inefficient we are not using all our resources so to go point b there would be

not impact in production of the two goods

• Identify the points on the above graph that are efficient. Why are these efficient?
• Points A and B because we are using all our resources
• What does the PPF look like when resources are homogeneous? 2 / 3

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• The demand curve is straight.
• How does an increase in labor productivity change the PPF?
• The demand curve would shift to the right
• Define the term Opportunity Cost.
• What causes increasing opportunity costs?
• Using the information below, what is the opportunity cost of a pound of beef when production

is increased from 100 lbs/month to 200 lbs/month?

Beef (lbs/month) Wheat (bushels/month)

0 2,000

100 1,600

200 900

300 0

Module 3 – Supply, Demand and Elasticity

• Explain the “Law of Demand” using a demand curve to illustrate the concept.
• As price increases demand decreases and vic versa
• Describe and illustrate a case where there is an increase in demand. Be sure to identify the

market being analyzed and the event leading to the increase in demand.

• Does a change in the price of a good cause a change in demand or a change in quantity

demand? Explain.

• Quantity demand because the demand curve already factors in changes in price
• Explain the “Law of Supply” using a supply curve to illustrate the concept.
• As price increases supply will also increase

• Describe and illustrate a case where there is a decrease in supply. Be sure to identify the market

being analyzed and the event leading to the decrease in supply.

• Does a change in the price of a good cause a change in supply or a change in quantity supplied?

Explain.

• Quanity supplied as it is still on the supply curve
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