Title: Chapter four: Pure Capitalism and the market system
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Content: How will be produced? The problem is what combination or mix of productive resources or inputs should be used in order to produce a desired product. That is to use more labor and less capital or vice versa, to more skilled labor and less units of unskilled labor or vice versa. In a price system, the combination or mix of inputs should be based on least-combination method. This method maximizes the profit and minimizes the cost. In other words, the least-cost combination is the level of input use that produces a given level of output at minimum cost. On the other hand, in a price system, competition will force firms to use the least cost combination method. Competition means there are large numbers of buyers and sellers in each market that are acting independently. Therefore, those firms that use the least cost combination method will be able to lower the price of their products and make a profit. For whom it will be produced?