No Free Lunch: Economics for a Fallen World: Third Edition, Revised

Chapter Seven: Production: Man at Work 153 DESIRED LEARNING OBJECTIVES At the conclusion of this chapter, the student should be able to... § § List the four factor inputs required for production: land, labor, capital, and entrepreneurship § § Explain how production is a process with many stages over time, taking raw materials at the earliest stage and steadily adding value to intermediate products, and ending with a finished good § § Describe why the specific production process used by an entrepreneur will be driven by the relative prices of each factor of production § § Outline how demand for each factor is derived by the demand for the factor’s output, as well as the relative prices of related factors (complementary or substitutionary) § § Explain why some noble professions (like economics teachers!) are paid far less than shock entertainers like Lady Gaga § § Define the law of diminishing returns, and explain how it affects the demand for each factor of production § § Describe economies of scale § § Contrast economic and accounting profits § § Define total costs (including variable and fixed costs), and explain what makes a cost fixed or variable § § Explain why marginal cost curves initially slope downward and ultimately rise § § Define the conditions for profit maximization