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After reading this chapter, you should be able to:
- Define
fully what is meant by land, labor, capital, human capital,
entrepreneurship, and technology. Pages 16-17
- Explain
what is meant by opportunity cost. Page 16
- Draw
a production possibilities frontier, to explain its shape and
meaning, and to discuss how opportunity cost (both total and
marginal) can be illustrated with it. Pages 17-19
- Explain
what is meant by the law of increasing cost, be prepared to also be
able explain why it exists (and concurrently why the production
possibilities frontier is bowed out from the origin). Page 18
- Show
how a production possibilities frontier can be used to illustrate
efficiency, inefficiency, and scarcity (impossible combinations of
output). Page 19
- Show
how a production possibilities frontier can be used to illustrate
economic growth and technological change, even if the technological
change is specialized. Pages 20-23
- Explain
and draw the simple modal of the Circular Flow of Economic Activity
labeling its markets, actors, and money
flows. Page 25
- Define
the difference between absolute advantage and comparative advantage
and explain which one is more important as a basis for
specialization and trade. Pages 26-28
- Be
able to compute absolute and comparative advantage from numerical
examples and to tell from such computations which country should
specialize in which product. Page 28
- Convey how economic growth and the strength it provides
can lead to victory in international conflicts. Pages 28-31
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