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Entrepreneurial ability is the factor of production necessary to combine efficiently the other resou

Entrepreneurial ability is the factor of production necessary to combine efficiently the other resou

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-Entrepreneurial ability is the factor of production necessary to combine efficiently the other resources to produce goods and services -Suppose that North Korea doesn’t trade with any other country. Then we know that its PPF must be the same as its CPF The Three Economic Goals o Economic Growth o Full Employment; Low Unemployment o Stable prices Factors of Production o Inputs of resources used in producing output o Land [Rent] Natural Resources [“gifts of nature”] Physical space on which production occurs and the natural resources with it Renewable Resources: used but then automatically replenished Ex. Trees Exhaustable Resources: After used it disappears Ex. Coal Fixed Resources: Cannot be replenished, but aren’t depleted (unlike exhaustables) Ex. Land o Labor [Wages] Work time and effort people devote to production Number of the individuals that could potentially work Human Capital: quality of labor; knowledge and skill that people obtain from education, on-the-job training and work experience High human capital produces better or more output than low human capital [skilled workers have higher than unskilled] o Capital o Entrepreneurship The ability and willingness on the part of people to figure out new and better products to meet the desires of consumers and new and better ways to produce Production Possibilities Frontier [PPF] o Allows for the visualization of tradeoffs made when reallocating inputs from producing one good to another o Tradeoff along PPF More than one good cannot be produced without producing less of another good o Points Outside PPF Desirable but unattainable with given amount of available resources o Points Inside PPF Known as production efficiency
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Due to unemployed/ misallocation of resources Consumption Possibilities Frontier [CPF] o Autarky [self-sufficient] Doesn’t trade; consumes only what they can produce CPF is same as PPF Without trade, economic gains are diminished o Voluntary Trade By specializing on the basis of comparative advantage, total production increases Expand CPF Gains From Trade Economic Growth o An increase in the total output (Y) of the economy o The expansion (shifting out) of the economy’s PPF o Productivity Amount of total output (Y) produced from each hour of worker’s time
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