Which One of the Following Is an Example of the Circular

question 200

Multiple Choice

Which one of the following is an example of the circular flow model and shows the interdependence of households and firms?

• A) Households demand their resources from the firms in the factor markets and, in turn, supply in the product market the goods and services produced by firms.
• B) The firms go to the resource market to supply resources that households demand and, in turn, provide households with the goods and services produced for the product markets.
• C) Households supply their resources to the firms in the factor markets and, in turn, demand in the product market the goods and services produced by the firms.
• D) The firms in the factor markets pay to households in the form of wages, interest, rent and profit ⎯ for resources demanded.
• E) The circuit is completed when the payments flow from households, through the product markets, and to the firms for the goods and services they demand.

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Definitions:

Marginal Cost Curve

An illustrated chart demonstrating how the cost for producing an additional unit of a product fluctuates with increased production volume.

Fixed Capital Input

Assets and resources used in production that are not consumed or changed and can be used repeatedly over time, such as machinery and buildings.

Variable Labor Input

Labor whose usage level can be changed in the short term to match the level of output production.

Lowest Cost Level

The point at which a business can produce its goods or services at the minimum possible cost.