McConnell_Brue_Chapter02

Alternatively when goods go begging for owners in the

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Unformatted text preview: owners in the market, producers recognize this trend as well and decrease production accordingly. In summary, the action of consumers voting with their dollars in the market by responding to product and service prices communicates production information clearly without the need for additional information exchange. 10 Chapter 2: The Market System and The Circular Flow Slide 25 What resources will we use to produce our goods? The market process and price also automatically answer this question for us in that producers are prompted to use the least-cost combination of input resources in order to assure themselves of maximizing profits. Therefore, producers maximize profits in that they seek out the resource combination with the lowest cost and as such the price of resources indirectly answers this question automatically as well. Chapter 2 25 Learning Objective 2-3 Slide 26 What resources will we use to produce our goods? Market systems have the capacity to address this question and come to an efficient resolution automatically as well. Producers recognize that controlling cost of pr...
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