The Circular-Flow Diagram

question 85

Multiple Choice

The circular-flow diagram

• A)is an economic model.
• B)incorporates two types of decision makers: households and firms.
• C)represents the flows of inputs,outputs,and dollars.
• D)All of the above are correct.

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Definitions:

Market Equilibrium

The state in which the supply and demand for a good or service are balanced, leading to a stable price.

Consumer Surplus

The variance between the total price consumers are ready and able to fork over for a good or service and the sum they ultimately pay.

Deadweight Loss

A loss of economic efficiency that can occur when the equilibrium for a good or a service is not achieved or is not achievable.

Consumer Surplus

The difference between the total amount that consumers are willing to pay for a good or service and the total amount they actually do pay.