Which of the Following Statements Illustrates That the Idea of Comparative

question 5

Multiple Choice

Which of the following statements illustrates that the idea of comparative advantage is embedded in the circular flow diagram?

• A) Households spend money on durable and non durable goods.
• B) Households are composed of individuals.
• C) The total dollar value of expenditures should equal the dollar value of incomes.
• D) Wages and salaries represent a major percentage of the firms' expenditures.
• E) Firms use the labour they hire to produce goods and services,which they sell to households.

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Definitions:

Monopolistically Competitive

Describes a market structure where many firms sell products that are similar but not identical, allowing for significant competition but with a degree of product differentiation.

Product Differentiation

The process by which companies distinguish their products from those of competitors in the eyes of consumers by varying design, quality, or other attributes.

Monopolistically Competitive

A market structure in which many companies sell products that are similar but not identical, allowing for competition based on price, quality, and branding.

Market Price

Today's rate at which a service or asset is being offered for buying or selling.