UC Berkeley Econ 1 Midterm 1
Exam Questions and Answers 100%
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Production Possibilities Frontier (PPF) - ✔✔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 - ✔✔whatever must be given up to obtain some other item
Microeconomics - ✔✔the study of how households and firms make decisions and how
they interact in markets
Macroeconomics - ✔✔the study of economy-wide phenomena including inflation,
unemployment, and economic growth
Positive Statements - ✔✔make a claim about how the world actually is
Normative Statements - ✔✔make a claim about how the world should be
Absolute Advantage - ✔✔the ability to produce a good using fewer inputs than another
producer
EMILY CHARLENE © 2025, ALL RIGHTS RESERVED 1
, Comparative Advantage - ✔✔the ability to produce a good at a lower opportunity cost
than another producer
Imports - ✔✔goods produced abroad and sold domestically
Exports - ✔✔goods produced domestically and sold abroad
Competitive Market - ✔✔a market in which there are many buyers and many sellers so
that each has a negligible impact on the market price
Price Takers - ✔✔buyers and sellers who must accept the price the market determines
Law of Demand - ✔✔the claim that, other things being equal, the quantity demanded of
a good falls when price of the good increases
Normal Good - ✔✔a good for which an increase in income leads to an increase in
demand for that good
Inferior Good - ✔✔a good for which an increase in income leads to a decrease in
demand
Substitutes - ✔✔two goods for which an increase in the price of one leads to an increase
in the demand for another
Complements - ✔✔two goods for which an increase in the price of one leads to a
decrease in the demand for another
EMILY CHARLENE © 2025, ALL RIGHTS RESERVED 2
Exam Questions and Answers 100%
Pass
Production Possibilities Frontier (PPF) - ✔✔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 - ✔✔whatever must be given up to obtain some other item
Microeconomics - ✔✔the study of how households and firms make decisions and how
they interact in markets
Macroeconomics - ✔✔the study of economy-wide phenomena including inflation,
unemployment, and economic growth
Positive Statements - ✔✔make a claim about how the world actually is
Normative Statements - ✔✔make a claim about how the world should be
Absolute Advantage - ✔✔the ability to produce a good using fewer inputs than another
producer
EMILY CHARLENE © 2025, ALL RIGHTS RESERVED 1
, Comparative Advantage - ✔✔the ability to produce a good at a lower opportunity cost
than another producer
Imports - ✔✔goods produced abroad and sold domestically
Exports - ✔✔goods produced domestically and sold abroad
Competitive Market - ✔✔a market in which there are many buyers and many sellers so
that each has a negligible impact on the market price
Price Takers - ✔✔buyers and sellers who must accept the price the market determines
Law of Demand - ✔✔the claim that, other things being equal, the quantity demanded of
a good falls when price of the good increases
Normal Good - ✔✔a good for which an increase in income leads to an increase in
demand for that good
Inferior Good - ✔✔a good for which an increase in income leads to a decrease in
demand
Substitutes - ✔✔two goods for which an increase in the price of one leads to an increase
in the demand for another
Complements - ✔✔two goods for which an increase in the price of one leads to a
decrease in the demand for another
EMILY CHARLENE © 2025, ALL RIGHTS RESERVED 2
