The Circular Flow Diagram Shows That

question 178

Multiple Choice

The circular flow diagram shows that

• A)the value of total income is equal to the total value of expenditures on final goods and services.
• B)firms pay households wages, and households receive transfer payments from firms.
• C)households spend all their income on goods and services.
• D)GDP will be less than the total value of expenditures on final goods and services in the economy.
• E)firms own all factors of production.

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Definitions:

Competitive Price-searcher

A market condition where sellers actively set prices and seek to differentiate their products in an effort to attract consumers in a competitive environment.

Economic Losses

Financial losses incurred by businesses or economies, often due to inefficiencies, misallocation of resources, or external factors.

Barriers to Entry

Barriers to entry are obstacles that make it difficult for new competitors to enter a market, including high initial costs, licensing requirements, and strong brand loyalty among consumers.

Competitive Price-searcher

A market structure where firms set their prices and output levels to compete for consumers in a market with many sellers and product differentiation.