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1 WGU D089 PRINCIPLES OF ECONOMICS EXAM VERSION A & B
LATEST 2024-2025 COMPLETE 350 QUESTIONS AND DETAILED
CORRECT ANSWERS JUST RELEASED
WGU D089 PRINCIPLES OF ECONOMICS EXAM A
Q: What causes changes in demand (shifts in the demand curve)? - ANSWER-- Changes in consumer income, tastes, and preferences
- The size of the population
- prices of other goods such as complements and substitutes
- expectations about the future.
Q: What fundamental similarity do nearly all demand curves share? - ANSWER-They slope down from left to right
Q: What is the positive relationship between price and quantity known as? - ANSWER-The law of supply
Q: What does the law of supply assume? - ANSWER-That all variables affecting supply, other than price, remain constant
Q: What does a rise in the price of a good or service increase? - ANSWER-The quantity supplied of that good or service
Q: What does a supply curve depict? - ANSWER-The relationship between the price of a good or service and the quantities companies are willing to sell at those prices
Q: What is a supply schedule? - ANSWER-A table view of the price-quantity pairing that compose the supply curve.
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2 Q: What will suppliers do to adjust for non-price changes related to the determinants of supply? - ANSWER-Shift production
Q: What will suppliers do to adjust for price-related changes on the supply curve? - ANSWER- Move production levels
Q: what are changes in supply (shifts in the supply curve) caused by? - ANSWER-Prices of inputs, technology,expectations, number of sellers, and government policies and regulations
Q: What fundamental similarity do nearly all supply curves share? - ANSWER-They slope up from left to right
Q: When does the equilibrium price and equilibrium quantity occur? - ANSWER-Where the supply and demand curves cross.
Q: When does equilibrium occur? - ANSWER-When the quantity demanded is equal to the quantity supplied
Q: Why would the price be below the equilibrium level? - ANSWER-The quantity demanded will exceed the quantity supplied. -- Excess demand or a shortage will exist.
Q: What is occurring if the price is above the equilibrium level? - ANSWER-The quantity supplied will exceed the quantity demanded. -- Excess supply or a surplus will exist
Q: When does the equilibrium in the market change? - ANSWER-When an event shifts either the supply or demand curve
Q: What does price elasticity measure? - ANSWER-The responsiveness of the quantity demanded or supplied of a good to a change in its price. 2 / 4
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Q: How is price elasticity of demand calculated? - ANSWER-% change in quantity demand / % change in price
Q: What are the three ways to describe elasticity? - ANSWER-- Elastic (Quantity is very responsive)
- Unit Elastic (equal change in quantity)
- Inelastic (Quantity is not very responsive)
Q: What is indicated by an elastic demand or supply curve? - ANSWER-The quantity demanded or supplied responds to price changes in a greater than proportional manner.
Q: What is indicated by an inelastic demand or supply curve? - ANSWER-A given percentage change in price will cause a smaller percentage change in the quantity demanded or supplied.
Q: What is indicated by a unitary elasticity demand or supply curve? - ANSWER-A given percentage change in price leads to an equal percentage change in the quantity demanded or supplied.
Q: What happens if demand is inelastic? - ANSWER-An increase in price causes an increase in total revenue.
Q: What happens if demand is elastic? - ANSWER-An increase in price causes a decrease in total revenue
Q: Why would a price floor or a price ceiling be imposed? - ANSWER-It will prevent a market from adjusting to its equilibrium price and quantity and thus will create an inefficient outcome
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4 Q: What is the outcome of a price ceiling being set below the equilibrium price? - ANSWER- Quantity demanded will exceed quantity supplied and excess demand or shortages will result.
Q: What is the outcome of a price floor being set above the equilibrium price? - ANSWER- Quantity supplied will exceed quantity demanded and excess supply or surpluses will result.
Q: When might government-imposed price controls have a positive effect - ANSWER-If they are used to correct an existing market failure
Q: What happens when price controls are applied to well-functioning markets? - ANSWER-The market outcome is inefficient
Q: What happens to market outcomes when information about the quality of products is imperfect? - ANSWER-Market outcomes will be inefficient
Q: What does a buyer rely on to judge the quality of products when confronted with imperfect information? - ANSWER-Price
Q: What is the result of buyer's relying on price to indicate the quality of products when confronted with imperfect information? - ANSWER-Markets may have difficulty reaching an equilibrium price and quantity
Q: In high-quality or medium quality goods markets with imperfect information where sellers find it difficult to demonstrate the quality of their goods to buyers, what are buyer's unwilling to do? - ANSWER-Pay a higher price for the goods
Q: What can imperfect information lean to? - ANSWER-Riskier behavior due to moral hazard
Q: What are used to mitigate the risk of imperfect information? - ANSWER-Guarantees, warranties, and service contracts
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