Figure 2-2 -Refer to Figure 2-2.Boxes a and B of This Circular-Flow

question 143

Multiple Choice

Figure 2-2
-Refer to Figure 2-2.Boxes A and B of this circular-flow diagram represent

• A)firms and households.
• B)households and government.
• C)the markets for goods and services and the markets for financial assets.
• D)the markets for goods and the markets for services.

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Definitions:

Fixed Cost

A cost that does not change with the level of output or production, such as rent or salaries.

Short Run

A period in economics during which at least one input, such as plant size, is fixed and cannot be changed.

Physical Capital

Tangible assets such as buildings, machinery, and equipment used in the production of goods and services.

Variable Cost

Costs that vary directly with the level of production, such as raw materials, labor, and energy used in the manufacturing process.