Page 1 of 97
1
WGU C211 OA EXAM 2023-2024 ACTUAL EXAM
400 QUESTIONS AND CORRECT DETAILED
ANSWERS WITH RATIONALES (100% VERIFIED
ANSWERS) AGRADE
What is the purpose of having property rights and intellectual property rights? - ANSWER-To legally protect the use of tangible and intangible property and allow its lawful owner to derive income and other benefits from it What are the two POLAR types of economies? - ANSWER-MARKET economies and CENTRALLY PLANNED economies In addition to encouraging efficiency, why might a government intervene in a market? - ANSWER-To promote equality What is the relationship between total and marginal cost - ANSWER-Marginal cost is the CHANGE IN TOTAL COST divided by the CHANGE IN QUANTITY A farmer sells wheat in a perfectly competitive market.
Which action should the farmer take to maximize profits? - ANSWER-Produce the quantity where the PRICE EQUALS the farmer's MARGINAL COSTS What is the economic profit of a competitive firm? - ANSWER-The difference between TOTAL
REVENUE AND TOTAL COST
Which condition applies when a competitive firm decides to temporarily shut down? - ANSWER-Average VARIABLE COSTS are ABOVE the PRICE What is the producer's demand curve if the producer sells a differentiated product? - ANSWER- Downward sloping 1 / 4
Page 2 of 97
2 Which statement describes a competitive firm's demand curve? - ANSWER-It is MORE elastic than a MONOPOLY'S demand curve What is the point at which a monopoly maximizes profit? - ANSWER-Where MARGINAL COST
EQUALS MARGINAL REVENUE
What is a characteristic of monopolistic competition? - ANSWER-Many firms and differentiated products What is a likely outcome of the standard prisoner's dilemma game? - ANSWER-Both prisoners confess How does the prisoner's dilemma help in understanding company behavior in an oligopoly? - ANSWER-Company strategies MUST consider actions by rival firms What do economists use to represent a consumer's preferences? - ANSWER-Indifference curves What can be assumed that the consumer will buy if it is observed that the consumer's budget constraint has shifted inward? - ANSWER-Fewer normal goods and more inferior goods What will happen to the market price and quantity in the short run if there is an increase in market demand in a perfectly competitive market? - ANSWER-The equilibrium price will increase, and the equilibrium quantity will increase What will happen to equilibrium quantity and price if both demand and supply decrease? - ANSWER-Quantity will decrease but price can either increase or decrease What happens to demand quantity for normal goods as percentage change in income increases? - ANSWER-Demand increases What do the positive or negative numbers of cross-price elasticity of demand represent? - ANSWER-Substitutes or complements 2 / 4
Page 3 of 97
3 What is one way the Federal Reserve influences the reserve ratio? - ANSWER-By altering reserve requirements Which fiscal policy would be most effective at raising consumer spending and expanding aggregate demand? - ANSWER-Enacting a permanent INCOME TAX CUT What is the effect of an increase in the money supply in the short run? - ANSWER-Interest rates decrease and aggregate demand for goods and services increase How is consumer surplus represented on a graph? - ANSWER-area below the demand curve and above the price Define producer surplus? - ANSWER-The amount the seller is PAID minus the COST of PRODUCTION (OR) The area below the price and above the supply curve on a graph A painter spends $200 on paint. He then bills the homeowner $1,000 to cover his time and his expenses.
What is the amount of these transactions that is added to gross domestic product (GDP)? -
ANSWER-$1,000
A U.S. state purchases a fleet of new highway patrol vehicles manufactured in Japan.
How are the components of U.S. gross domestic product (GDP) affected? - ANSWER-1) Net exports decrease and 2) Government expenditures increase A nation ends a tariff on bananas, which is an imported product.
- / 4
Page 4 of 97
4 What will be the effect on banana prices within that nation? - ANSWER-The price will MATCH the global market price What effect does implementing a new tariff have on the government that implements it? - ANSWER-Tax revenue INCREASES Why do nations trade? - ANSWER-Firms in one nation generate valuable, unique, and hard to imitate exports that firms in other nations find it beneficial to import Gross National Product (GNP) - ANSWER-The total value of goods and services, including income received from abroad, produced by the residents of a country within a specific time period, usually one year Bretton Woods System (1944) - ANSWER-A system in which all currencies were pegged at a fixed rate to the US dollar Spot transactions - ANSWER-The classic single-shot exchange of one currency for another If elasticity equals 1 or (10/10 = 1) - ANSWER-Demand is UNIT ELASTIC What is the key difference between a competitive firm and a monopoly? - ANSWER-The monopoly has an ability to influence the price of its output Griffen Good - ANSWER-A good for which an increase in the price raises the quantity demanded If elasticity equals 0 or (is a vertical line) - ANSWER-Demand is perfectly inelastic If marginal revenue is greater than marginal cost, the firm should do what to its output? - ANSWER-Increase it If marginal cost is greater than marginal revenue, the firm should do what to its output? - ANSWER-Decrease the target output
- / 4