13. The circular-flow model The following diagram presents a circular-flow model of a simple economy. The outer set of arrows (shown in green) shows the flow of dollars, and the inner set of arrows (shown in red) shows the corresponding flow of inputs and outputs. Based on this model, households earn income when___ purchase in factor markets. Suppose Valerie earns $700 per week working as a programmer for PC Pros. She uses $10 to have breakfast at Dinah's Diner. Dinah's Diner pays Shen $400 per week to work as a short-order cook. Shen uses $125 to purchase software from PC Pros. Identify whether each of the following events in this scenario occurs in the factor market or the product market. Event Factor Market Product Market Valerie spends $10 to have breakfast. Shen spends $125 to purchase software from PC Pros. Valerie earns $700 per week working for PC Pros. Which of the elements of this scenario represent a flow from a firm to a household? This could be a flow of dollars, inputs, or outputs. Check all that apply. A-The breakfast Valerie receives B-The $125 Shen spends to purchase software from PC Pros C-The $400 per week Shen earns working for Dinah's Diner D-Valerie's labor

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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13. The circular-flow model

The following diagram presents a circular-flow model of a simple economy. The outer set of arrows (shown in green) shows the flow of dollars, and the inner set of arrows (shown in red) shows the corresponding flow of inputs and outputs.

Based on this model, households earn income when_________ purchase______ in factor markets.

Suppose Valerie earns $700 per week working as a programmer for PC Pros. She uses $10 to have breakfast at Dinah's Diner. Dinah's Diner pays Shen $400 per week to work as a short-order cook. Shen uses $125 to purchase software from PC Pros.

Identify whether each of the following events in this scenario occurs in the factor market or the product market.

Event	Factor Market	Product Market
Valerie spends $10 to have breakfast.
Shen spends $125 to purchase software from PC Pros.
Valerie earns $700 per week working for PC Pros.

Which of the elements of this scenario represent a flow from a firm to a household? This could be a flow of dollars, inputs, or outputs. Check all that apply.

A-The breakfast Valerie receives

B-The $125 Shen spends to purchase software from PC Pros

C-The $400 per week Shen earns working for Dinah's Diner

D-Valerie's labor

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