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, inner set of arrows (shown in red) shows the corresponding flow of inputs and outputs. Firms Markets for Goods and Services Markets for Factors of Production Households
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, inner set of arrows (shown in red) shows the corresponding flow of inputs and outputs. Firms Markets for Goods and Services Markets for Factors of Production Households
Chapter10: Consumer Choice Theory
Section: Chapter Questions
Problem 10P
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![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.
Firms
Markets for
Goods and Services
Markets for
Factors of Production
Event
Based on this model, households earn income when firms
Households
Suppose Becky earns $725 per week working as a programmer for Maction. She uses $8 to have a pint at Breanna's Brewing Company. Breanna's
Brewing Company pays Alex $450 per week to serve as head brewer. Alex uses $250 to purchase software from Maction.
purchase labor and capital
Identify whether each of the following events in this scenario occurs in the market for factors of production or the market for goods and services.
Market for Factors of Production Market for Goods and Services
Alex earns $450 per week working for Breanna's Brewing Company.
Alex spends $250 to purchase software from Maction.
Becky earns $725 per week working for Maction.
The beer Becky receives
The $250 Alex spends to purchase software from Maction
The $450 per week Alex earns working for Breanna's Brewing Company
in markets for factors of production.
O
O
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.
True or False: Gross domestic product (GDP) cannot be used to measure the economy's income.
O
O](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F44891874-4310-4c58-bcc0-a3389a0af64a%2F0a29607c-7c67-4992-93f0-fb1e31cfc059%2Fxlt76d_processed.png&w=3840&q=75)
Transcribed Image Text: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.
Firms
Markets for
Goods and Services
Markets for
Factors of Production
Event
Based on this model, households earn income when firms
Households
Suppose Becky earns $725 per week working as a programmer for Maction. She uses $8 to have a pint at Breanna's Brewing Company. Breanna's
Brewing Company pays Alex $450 per week to serve as head brewer. Alex uses $250 to purchase software from Maction.
purchase labor and capital
Identify whether each of the following events in this scenario occurs in the market for factors of production or the market for goods and services.
Market for Factors of Production Market for Goods and Services
Alex earns $450 per week working for Breanna's Brewing Company.
Alex spends $250 to purchase software from Maction.
Becky earns $725 per week working for Maction.
The beer Becky receives
The $250 Alex spends to purchase software from Maction
The $450 per week Alex earns working for Breanna's Brewing Company
in markets for factors of production.
O
O
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.
True or False: Gross domestic product (GDP) cannot be used to measure the economy's income.
O
O
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