The Flow of "Net Taxes" in the Circular Flow Model

question 94

Multiple Choice

The flow of "net taxes" in the circular flow model with a government sector accounts for the following items, except

• A) transfer payments such as social security benefits.
• B) subsidies to farmers, airlines, and others.
• C) proprietary income generated by public utilities and state lotteries.
• D) salaries to military personnel, public school teachers, and government inspectors.

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Definitions:

Profit Maximization

The operation by which businesses deduce the pricing and quantity of output that maximizes profit gains.

Ore

Naturally occurring minerals or rock from which valuable metals or other elements can be extracted profitably.

Marginal Rate of Substitution

The rate at which a consumer is willing to trade one good for another while maintaining the same level of utility.

Pareto Optimal

An arrangement of resources where it is unworkable to elevate any person’s or preference's state without concurrently depreciating another’s.