What Is the Circular Flow of Economic Activity a Model

question 102

Multiple Choice

What is the circular flow of economic activity a model of?

• A) the interaction among taxes, prices, and profits
• B) the influence of government on business behaviour
• C) the role of unions and government in the economy
• D) the movement of goods, services, and payments between households and firms

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Definitions:

Profit Maximization

A rephrased definition: The strategy or aim of a firm to achieve the highest profit possible, usually by adjusting outputs, prices, or production costs.

Market Price

The current price at which an asset or service can be bought or sold in the open market.

Long Run

A period in economics where all inputs or factors of production can be varied, with no fixed factors, allowing for full adjustment to changes.

Economic Profit

The divergence between overall financial returns and comprehensive expenses, integrating both apparent and implied costs.