What Is the Function of the Circular Flow Model

question 66

Multiple Choice

What is the function of the circular flow model?  

• A) It measures identical flows through the different markets. 
• B) It shows how firms maximize profits and minimize costs. 
• C) It shows how competitive markets interact with noncompetitive markets. 
• D) It measures the value of income earned by the public sector.

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Definitions:

Supply Of Labor

The total number of workers willing and able to work in an economy, including both employed and unemployed individuals actively seeking jobs.

Demand For Labor

The desire or need for employees by employers, determined by the wage rate and the level of production required by the firm or economy.

Price Floor

A government or regulatory-imposed minimum price for a good or service, intended to ensure that the market price does not fall below a certain level.

Surplus

The amount of a product or resource that exceeds the amount actually utilized or demanded.