UC Berkeley Econ 1 Midterm 1 ACTUAL
Exam Questions and CORRECT
Answers
Production Possibilities Frontier (PPF) - CORRECT ANSWER - a graph that shows the
combinations of output that the economy can possibly produce given the available factors of
production and the available production technology
Opportunity Cost - CORRECT ANSWER - whatever must be given up to obtain some
other item
Microeconomics - CORRECT ANSWER - the study of how households and firms make
decisions and how they interact in markets
Macroeconomics - CORRECT ANSWER - the study of economy-wide phenomena
including inflation, unemployment, and economic growth
Positive Statements - CORRECT ANSWER - make a claim about how the world actually
is
Normative Statements - CORRECT ANSWER - make a claim about how the world should
be
Absolute Advantage - CORRECT ANSWER - the ability to produce a good using fewer
inputs than another producer
Comparative Advantage - CORRECT ANSWER - the ability to produce a good at a lower
opportunity cost than another producer
Imports - CORRECT ANSWER - goods produced abroad and sold domestically
, Exports - CORRECT ANSWER - goods produced domestically and sold abroad
Competitive Market - CORRECT ANSWER - a market in which there are many buyers
and many sellers so that each has a negligible impact on the market price
Price Takers - CORRECT ANSWER - buyers and sellers who must accept the price the
market determines
Law of Demand - CORRECT ANSWER - the claim that, other things being equal, the
quantity demanded of a good falls when price of the good increases
Normal Good - CORRECT ANSWER - a good for which an increase in income leads to an
increase in demand for that good
Inferior Good - CORRECT ANSWER - a good for which an increase in income leads to a
decrease in demand
Substitutes - CORRECT ANSWER - two goods for which an increase in the price of one
leads to an increase in the demand for another
Complements - CORRECT ANSWER - two goods for which an increase in the price of
one leads to a decrease in the demand for another
Law of Supply - CORRECT ANSWER - the claim that the quantity supplied of a good
rises when the price of that good rises
Equilibrium - CORRECT ANSWER - a situation in which the market price has reached
the level at which quantity supplied equals quantity demanded
Exam Questions and CORRECT
Answers
Production Possibilities Frontier (PPF) - CORRECT ANSWER - a graph that shows the
combinations of output that the economy can possibly produce given the available factors of
production and the available production technology
Opportunity Cost - CORRECT ANSWER - whatever must be given up to obtain some
other item
Microeconomics - CORRECT ANSWER - the study of how households and firms make
decisions and how they interact in markets
Macroeconomics - CORRECT ANSWER - the study of economy-wide phenomena
including inflation, unemployment, and economic growth
Positive Statements - CORRECT ANSWER - make a claim about how the world actually
is
Normative Statements - CORRECT ANSWER - make a claim about how the world should
be
Absolute Advantage - CORRECT ANSWER - the ability to produce a good using fewer
inputs than another producer
Comparative Advantage - CORRECT ANSWER - the ability to produce a good at a lower
opportunity cost than another producer
Imports - CORRECT ANSWER - goods produced abroad and sold domestically
, Exports - CORRECT ANSWER - goods produced domestically and sold abroad
Competitive Market - CORRECT ANSWER - a market in which there are many buyers
and many sellers so that each has a negligible impact on the market price
Price Takers - CORRECT ANSWER - buyers and sellers who must accept the price the
market determines
Law of Demand - CORRECT ANSWER - the claim that, other things being equal, the
quantity demanded of a good falls when price of the good increases
Normal Good - CORRECT ANSWER - a good for which an increase in income leads to an
increase in demand for that good
Inferior Good - CORRECT ANSWER - a good for which an increase in income leads to a
decrease in demand
Substitutes - CORRECT ANSWER - two goods for which an increase in the price of one
leads to an increase in the demand for another
Complements - CORRECT ANSWER - two goods for which an increase in the price of
one leads to a decrease in the demand for another
Law of Supply - CORRECT ANSWER - the claim that the quantity supplied of a good
rises when the price of that good rises
Equilibrium - CORRECT ANSWER - a situation in which the market price has reached
the level at which quantity supplied equals quantity demanded
