In a Simple Circular-Flow Diagram

question 9

Multiple Choice

In a simple circular-flow diagram,

• A)households spend all of their income.
• B)all goods and services are bought by households.
• C)expenditures flow through the markets for goods and services,while income flows through the markets for the factors of production.
• D)All of the above are correct.

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Definitions:

Economic Efficiency

A state in which resources are allocated in a way that maximizes the production of goods and services at the lowest cost, while achieving the highest possible welfare or utility.

Negative Externalities

Costs experienced by third parties due to the actions of others that are not reflected in market prices.

Clayton Act

A U.S. antitrust law, adopted in 1914, aimed at protecting competition by prohibiting certain actions that lead to anticompetitiveness.

Celler-Kefauver Act

A U.S. law enacted in 1950 to amend the Clayton Act, aiming to prevent anti-competitive mergers and acquisitions by prohibiting the acquisition of assets if the effect reduces competition.