Which Actor in the Simplified Circular Flow Model Buys or Rents

question 5

Multiple Choice

Which actor in the simplified circular flow model buys or rents land, labor, and capital?

• A) Firms
• B) Households
• C) Markets for factors of production
• D) Government

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Definitions:

MRSxy

The Marginal Rate of Substitution between good x and good y, indicating the rate at which a consumer is willing to give up good y for an additional unit of good x, keeping utility constant.

Purchasing Power

The real value of money, defining how much goods or services a unit of currency can buy, often influenced by inflation.

Price

The price tag attached to purchasing a good or service.

Consumer's Income

The total amount of money earned by a consumer, determining their purchasing power and affecting their demand for goods and services.