Which of the following are flows in the circular flow model?
a. the flow of income earned by factors of production and the flow of expenditures on goods and services
b. the flow of goods and the flow of services
c. the flow of costs and the flow of revenue
d. the flow of income received by households and the flow of tax revenues paid by households
14. Which of the following statements about a simple circular flow model is true?
a. Producers are neither buyers nor sellers in the product market.
b. Households are sellers in the product market.
c. Producers are buyers in the factor market.
d. Households are neither buyers nor sellers in the factor market.
One Digital Camera
Wheat (per pound)
100 hours
4 hours
South Korea
60 hours
3 hours
15) The term “property rights” refers to
a. the ability to exercise control over one’s own resources within the confines of the law.
b. the government’s right to appropriate land from wealthy individuals to redistribute to low income families.
c. the physical possession of a house or any other property which the owner legally purchased.
d. the right of a business not to have its assets confiscated by the government in the event that the business is accused of committing fraud.

If a firm expects that the price of its product to be higher in the future than it is today
a. the firm has an incentive to decrease supply now and increase supply in the future.
b. the firm has an incentive to decrease quantity supplied now and increase quantity supplied in the future.
c. the firm will go out of business.
d. the firm has an incentive to increase supply now and decrease supply in the future.
Loose leaf Tea
Price per lb.
(dollars) Sunil’s
Quantity De-manded (lbs) Mia’s
Quantity De-manded (lbs) Rest of Market
Demanded (lbs) Market
Quantity de-manded (lbs)
$8 4 0 30
6 7 2 40
5 9 3 51
4 12 5 64
3 15 8 90

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18) Which of the following is the correct way to describe equilibrium in a market?
a. At equilibrium, demand equals supply.
b. At equilibrium, quantity demanded equals quantity supplied.
c. At equilibrium, scarcity is eliminated.
d. At equilibrium, market forces no longer apply.

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