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LO1-1

● Scarcity: Lack of enough resources to satisfy all desired uses of those resources LO1-2

● Scarcity of resources limits the amount of goods and services that can be produced ● Scarce resources-There’s a limit to the amount of output we can produce in a given time period with available resources and technology LO1-3

● Factors of production-Resource inputs used to produce goods and services. The four basic factors of production are: ○ Capital(final goods produced for use in the production of other goods, such as equipment and structures) ○ Entrepreneurship. (The assembling of resources to produce new or improved products and technologies) ○ Land(All natural resources) ○ Labor(The skills and abilities to produce goods and services) ● Production possibilities- The alternative combinations of final goods and services that could be produced in a given period with all available resources and technology.

LO1-4

● WHAT to produce? The point we choose on the production possibilities curve determines what mix of output actually gets produced. ● HOW to produce? Someone has to make a decision about which production methods to use. ● FOR WHOM to produce? There must be a mechanism to determine whose wants and needs will be satisfied and who must go without. LO1-5

● Market mechanism: The use of market prices and sales to signal desired outputs

LO2-1

● The United States is by far the world’s largest economy. LO2-2 ●

On average, U.S. output has grown by roughly 3 percent a year, nearly three times faster than population growth (1 percent)Over time, the growth of output in the United States has greatly exceeded population growth. As a consequence, GDP per capita has grown tremendously.

LO2-3

● Regardless of how much output a nation produces, every nation ultimately depends on its resources its factors of production to produce goods and

services LO2-4

● The high productivity of the U.S. economy results from using highly educated workers in capital-intensive production processes.

LO4-1

● The market fails when it produces a suboptimal mix of outputs. Market failure establishes a basis for government intervention. The four specific sources of market failure are ○ Public goods. ○ Externalities. ○ Market power. ○ Inequity LO4-2

● The federal government expanded greatly during the 1930s and World War II, but its share of output has shrunk in recent decades. ● Recent growth in federal spending has been on income transfers, not output. State and local governments purchase more output than the federal government and employ five times as many workers. LO4-3 ● Income and payroll taxes provide most federal revenues. • States get most revenue from sales taxes; local governments rely on property taxes.

LO4-4 ● Government failure occurs when intervention does not attain the optimal mix of output. ● Failure may result from outright waste (inefficiency) or from a misallocation of resources....