Based on the circular flow model, money flows from households to businesses in:
A. factor markets.
B. product markets.
C. neither factor nor product markets.
D. both factor and product markets.
Answer: B
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Suppose supply decreases, but there is no change in demand. As the market reaches its new equilibrium:
A. excess supply will lead the price to rise. B. excess demand will lead the price to rise. C. excess supply will lead the price to fall. D. excess demand will lead the price to fall.
An efficient allocation of resources requires that a product's price equal its average cost
a. True b. False Indicate whether the statement is true or false
Inefficiency exists in an economy when a good is
a. not being consumed by buyers who value it most highly. b. not distributed fairly among buyers. c. not produced because buyers do not value it very highly. d. being produced with less than all available resources.
Which of the following is most likely to be a variable cost?
A. Rental payments on office equipment B. Interest on business loans C. Fuel and power payments D. Real estate taxes