4-mavzu. O’rta asrlar iqtisodiy qarashlari. Merkantilizm iqtisodiy ta’limoti

What Will Be Produced?

How will a market system decide on the specific types

and quantities of goods to be produced? The simple

answer is this: The goods and services produced at a continuing

profit will be produced, and those produced at a

continuing loss will not. Profits and losses are the difference

between the total revenue (TR) a firm receives from

the sale of its products and the total opportunity cost

(TC) of producing those products. (For economists,

economic costs include not only wage and salary payments

to labor, and interest and rental payments for capital and

land, but also payments to the entrepreneur for organizing

and combining the other resources to produce a

commodity.)

Continuing economic profit (TR _ TC) in an industry

results in expanded production and the movement of

resources toward that industry. Existing firms grow and

new firms enter. The industry expands. Continuing losses

(TC _ TR) in an industry leads to reduced production

and the exit of resources from that industry. Some existing

firms shrink in size; others go out of business. The industry

contracts. In the market system, consumers are sovereign

(in command).