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LEARNING OBJECTIVES
After you have read this section, you should be able to answer the following questions:
What determines the production capabilities of an economy?
What is the marginal product of an input?
How is competitiveness related to the aggregate production function?
Economists analyze production in an economy by analogy to the production of output by a firm. Just as a firm takes inputs and transforms them into output, so also does the economy as a whole. We summarize the production capabilities of an economy with an aggregate production function.
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