Economics 101 Midterm #1 Questions
with Complete Answers 2026 Updated.
Economics - Answer The study of how society manages its scarce resources
Scarcity - Answer The limited nature of society's resources
Efficiency - Answer The property of society getting the most it can from its scarce resources
Equality - Answer The property of distributing economic prosperity uniformly among the
members of society
Opportunity Cost - Answer Whatever must be given up to obtain some item; measures
trade-offs
Incentive - Answer Something that induces a person to act
Market Economy - Answer An Economy that allocates resources through the decentralized
decisions of many firms and households as they interact in markets for goods and services
Property Rights - Answer The ability of an individual to own and exercise control over scarce
resources
Market Failure - Answer A situation in which a market left on its own fails to allocate
resources efficiently
Externality - Answer The impact of one person's actions on the well-being of a bystander
Market Power - Answer The ability of a single economic actor (or small group of actors) to
have a substantial influence on market prices
Scientific Method - Answer The dispassionate development and testing of theories about
how the world works
Circular-flow diagram - Answer A visual model of the economy that shows how dollars flow
through markets among households and firms
, Production Possibilities Frontier - 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
Positive Statements - Answer Claims that attempt to describe the world as it is
Normative Statements - Answer Claims that attempt to prescribe how the world should be
Absolute Advantage - Answer The ability to produce a good using fewer inputs than another
producer
Comparative Advantage - Answer The ability to produce a good at a lower opportunity cost
than another producer
Imports - Answer Goods produced abroad and sold domestically
Exports - Answer Goods produced domestically and sold abroad
Market - Answer A group of buyers and sellers of a particular good or service
Quantity Demanded - Answer The amount of a good that buyers are willing and able to
purchase
Law of Demand - Answer The claim that, other things being equal, the QD of a good falls
when the price of the good rises
Demand Schedule - Answer A table that shows the relationship between the price of a good
and the quantity demanded
Demand Curve - Answer A graph of the relationship between the price of a good and the QD
Normal Good - Answer A good for which, other things being equal, an increase in income
leads to an increase in demand
Inferior Good - Answer A good for which, other things being equal, an increase in income
leads to a decrease in demand
with Complete Answers 2026 Updated.
Economics - Answer The study of how society manages its scarce resources
Scarcity - Answer The limited nature of society's resources
Efficiency - Answer The property of society getting the most it can from its scarce resources
Equality - Answer The property of distributing economic prosperity uniformly among the
members of society
Opportunity Cost - Answer Whatever must be given up to obtain some item; measures
trade-offs
Incentive - Answer Something that induces a person to act
Market Economy - Answer An Economy that allocates resources through the decentralized
decisions of many firms and households as they interact in markets for goods and services
Property Rights - Answer The ability of an individual to own and exercise control over scarce
resources
Market Failure - Answer A situation in which a market left on its own fails to allocate
resources efficiently
Externality - Answer The impact of one person's actions on the well-being of a bystander
Market Power - Answer The ability of a single economic actor (or small group of actors) to
have a substantial influence on market prices
Scientific Method - Answer The dispassionate development and testing of theories about
how the world works
Circular-flow diagram - Answer A visual model of the economy that shows how dollars flow
through markets among households and firms
, Production Possibilities Frontier - 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
Positive Statements - Answer Claims that attempt to describe the world as it is
Normative Statements - Answer Claims that attempt to prescribe how the world should be
Absolute Advantage - Answer The ability to produce a good using fewer inputs than another
producer
Comparative Advantage - Answer The ability to produce a good at a lower opportunity cost
than another producer
Imports - Answer Goods produced abroad and sold domestically
Exports - Answer Goods produced domestically and sold abroad
Market - Answer A group of buyers and sellers of a particular good or service
Quantity Demanded - Answer The amount of a good that buyers are willing and able to
purchase
Law of Demand - Answer The claim that, other things being equal, the QD of a good falls
when the price of the good rises
Demand Schedule - Answer A table that shows the relationship between the price of a good
and the quantity demanded
Demand Curve - Answer A graph of the relationship between the price of a good and the QD
Normal Good - Answer A good for which, other things being equal, an increase in income
leads to an increase in demand
Inferior Good - Answer A good for which, other things being equal, an increase in income
leads to a decrease in demand
