1. Because of scarcity, people must make choices to forgo one thing in favor of another.

2. Economic interactions between people occur when they trade or exchange goods or services with each other.

3. Economic interactions occur in markets and within organizations.

4. The opportunity cost of a choice is the value of the forgone alternative that was not chosen.

5. One person or group of people has a comparative advantage in producing one good relative to another good if they can produce that good with comparatively less time, effort, or resources than another person can produce that good.

6. There are gains from international trade because by trading, people can either better satisfy their preferences for goods or better utilize their comparative advantage.

7. There are increasing opportunity costs because as the production of one good increases, the value of the forgone good increases.

8. The production possibilities curve is bowed out because of increasing opportunity costs.

9. Points on the production possibility curve are efficient, those inside the curve are inefficient, and those outside the curve are impossible.

10. They are called impossible because the economy does not have the resources to produce outside the production possibilities curve.

11. Economic growth shifts out the production possibilities curve.

12. Every economy must determine what are the goods and services to be produced, how are these goods and services to be produced, and for whom are the goods and services to be produced.

13. Freely determined prices, property rights, competitive markets, and freedom to trade at home and abroad characterize market, but not command, economies.

14. Market failure is a situation in which there is a role for the government in improving the market outcome. Government failure occurs when the government, even in the case of market failure, does worse than the market would have done if left on its own.

15. Prices serve as signals about what should be produced and consumed when there are changes in tastes or technology, provide incentives to people to alter their production or consumption, and affect the distribution of income.