specializing in what they produce and then use that income to purchase the products they need or want. The

division of labor allows individuals and firms to specialize and to produce more for several reasons: a) It allows
the agents to focus on areas of advantage due to natural factors and skill levels; b) It encourages the agents to

learn and invent; c) It allows agents to take advantage of economies of scale. Division and specialization of

labor only work when individuals can purchase what they do not produce in markets. Learning about

economics helps you understand the major problems facing the world today, prepares you to be a good citizen,

and helps you become a well-rounded thinker.

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1 • Self-Check Questions 25

1.2 Microeconomics and Macroeconomics

Microeconomics and macroeconomics are two different perspectives on the economy. The microeconomic
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