MIDTERM 1 – STUDY GUIDE
You are responsible for all materials that were covered in class from chapter 1 to chapter 4. This guide is only a
summary of topics that you need to study for your midterm. Your primary source of study is still your lecture
- Definition of economics (choices, scarcity, opportunity cost, and examples of these terms).
- Distinguishing between microeconomics and macroeconomics.
- Two big economic questions:
o What, how, and for whom question
o Self-interest vs. social interest
- Definition of factors of production and how to distinguish them.
- The economic way of thinking:
o Choice and tradeoff
o Opportunity cost
o Choosing at the margin
o Responding to incentives
o Positive statements vs. normative statements.
- Production possibilities frontier
o Attainable vs. non-attainable
o Calculate opportunity cost along the PPF
o Slope of PPF
o Shape of PPF
o How PPF illustrates
Opportunity cost = a decrease in quantity produced of one good / an increase in the
quantity produced of another good (know how to calculate opportunity cost using the
Concept of marginal cost
o Preference and marginal benefit
Principle of decreasing marginal benefit
o Economic growth