WGU - D089 - Principles of Economics
Macroeconomics - correct answer A branch of economics dealing with the
performance, structure, behavior, and decision-making of an economy as a whole
Microeconomics - correct answer A branch of economics that studies the
behavior of individuals and firms in making decisions regarding the allocation of
scarce resources and the interactions among these individuals and firms
Scarcity - correct answer The basic economic problem; the gap between limited,
scarce , resources and theoretically limitless wants
Opportunity cost - correct answer The next best alternative that is given up when
a choice is made
Think at the margin - correct answer Thinking about what the next step or an
additional action means for a person
Marginal benefit - correct answer The incremental increase in the benefit to a
consumer caused by the consumption of one additional unit of a good or service
Principles of Economics #1 - correct answer Everyone faces trade-offs
Principles of Economics #2 - correct answer The cost of something is determined
by what you give up to get it
Principles of Economics #3 - correct answer Rational people think at the margin
Principles of Economics #4 - correct answer People respond to incentives
Principles of Economics #5 - correct answer Trade can benefit everyone
Principles of Economics #6 - correct answer Markets are a sound method of
organizing economic activity
Principles of Economics #7 - correct answer Governments may be able to
improve market outcomes
Principles of Economics #8 - correct answer A nation's standard of living depends
on it's ability to produce.
Principles of Economics #9 - correct answer Printing too much money causes
prices to rise
,WGU - D089 - Principles of Economics
Principles of Economics #10 - correct answer There is a short-run trade-off
between inflation and unemployment
Economic systems - correct answer A system of the production, resource
allocation, and distribution of goods and services within a society or a given
geographic area
Traditional Economy - correct answer An economic system that relies on
customs, history, and time-honored beliefs. Tradition guides economic decisions
such as production and distribution
Command Economy - correct answer An economic system in which production,
investment, prices, and incomes are determined centrally by a government
Market Economy - correct answer An economic system in which the decisions
regarding investments, production, and distribution are guided by the price
signals created by the forces of supply and demand
Mixed Economy - correct answer An economic system in which both private
enterprise and a degree of state monopoly (Usually in public services, defense,
infrastructure, and basic industries) co-exist
Five key characteristics of a Traditional Economy - correct answer 1. It is centered
around families or tribes.
2. It exists in a hunter-gatherer and nomadic society.
3. Trade is heavily dependent on bartering rather than money.
4. It only produces what is needed, and a surplus is very rare.
5. It eventually changes from purely trade to the use of some type of currency.
Advantages to a Traditional Economy - correct answer There is little competition
or friction among members of the society.
People's roles and contributions are well understood.
It can be more sustainable than a technology-based economy.
Disadvantages to a Traditional Economy - correct answer It is exposed to
environmental changes and weather patterns.
,WGU - D089 - Principles of Economics
It is vulnerable to market of command economies, which consume and deplete
the resources or traditional economies.
Five key characteristics of a Command Economy - correct answer 1. All economic
activity is planned and controlled by a centralized government power.
2. The government decides how to use and distribute the nation's natural, capital,
and labor resources.
3. A nation's central power controls the priorities for how goods and services will
be produced and distributed.
4. Domestic competition is overpowered as the government monopolizes
businesses considered essential for economic goals such as utilities, finance, and
automotive companies.
5. Businesses are required to follow specific hiring and production targets set by
the government. This creates regulations and directives to enforce the centralized
plan.
Advantages of a Command Economy - correct answer In this type of system,
goods, services, and resources are deployed without concern for environmental
or other regulatory issues.
The government can transform the entire society to fit the constraints of its
national vision through nationalizing industry and deciding where workers will be
placed.
Disadvantages of a Command Economy - correct answer Underlying black market
economies tend to develop as a response to difficult access to goods and services.
Rationing commonly occurs due to poor planning and an inability to meet societal
demands.
People are discouraged from innovating and are required to follow orders and
keep with the central plan.
Five key characteristics of a Market Economy - correct answer 1. Privately-owned
goods and services are standard, and people and businesses have the right to
commercialize their property freely.
, WGU - D089 - Principles of Economics
2. People can innovate, produce, sell, and purchase goods and services.
3. Prices, production, and job availability are driven by self-motivation and
competition, according to the laws of supply and demand.
4. The economy relies on market efficiency where producers and consumers have
access to the same information to make economic decisions.
5. Government interference is limited to regulating safety, fair access,
environmental, and national defense issues.
Advantages of a Market Economy - correct answer Goods and services are readily
available because consumers and businesses have the freedom to negotiate
prices.
Production methods are efficient, which increases productivity and profitability.
Innovation is rewarded and encouraged, benefiting the society.
Individuals and organizations invest in successful ventures, which in turn drive
innovation and quality improvement.
Disadvantages of Market Economies - correct answer Competition drives market
economies, and, in many cases, there are not enough mechanisms implemented
to protect the underprivileged and disadvantaged.
There is a tendency for labor resources to be under-optimized because access to
education and skills improvement may not be affordable and accessible to
everyone.
There can be a sharp contrast between the economic power of the privileged
versus the power of the underprivileged. Society must decide between self-
interest and protecting the vulnerable in a climate where winners are overvalued.
Advantages of Mixed Economy - correct answer Goods and services are
distributed to where they are needed the most; therefore, prices are set by
supply and demand.
Competition incentivizes innovation and i,proves the quality of products and
services.
