Prompt: Using Wheelan as a guide, discuss how economic decisions about what to produce, how to produce, and how much to produce are made.
Wheelan, as most economists turn to the invisible hand as the driving force of a free market economy. This invisible hand is the power of people striving for their utility. Firms will produce items whose marginal cost is overpowered by its marginal gain. These products must be in demand of the public or the marginal cost will out weigh the marginal gain thus making this product non-profitable. Since resources are scarce, people must bid or pay to obtain resources they desire. This essentially creates supply and demand which dictate the price of these items. During periods when demand outweighs supply goods increase in value. When supply outweighs the demand the price will drop significantly. This is the invisible hand's way of telling a company their product is no longer profitable. Once a firm realizes that the certain product is no longer profitable, they can chose to improve, innovate or stop production and move on. Firms attempt to find the most efficient way to produce these goods in order to increase their profit.
There are some important ideas here but you are not providing clear and concise explanations. You are making statements but not backing them up with explanations. You wrote "firms will produce items whose marginal cost is overpowered by its marginal gain." Do you understand what that means given that we have not discussed it yet?
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