Confusion and inconvenience costs arise when inflation
a. improves the store of value function of money.
b. reduces the real value of the unit of account

Which of the following statements is FALSE?

A) Total income is always greater than total output. B) In the circular flow model, households sell factor services to businesses in return for factor payments. C) Businesses sell goods and services to households who use their income to pay for them. D) The value of total income is equal in value to total output because profit is a cost of production.

Suppose that in a market for used cars, there are good used cars and bad used cars (lemons). Consumers are willing to pay as much as $6,000 for a good used car but only $1,000 for a lemon

Sellers of good used cars value their cars at $5,000 each and sellers of lemons value their cars at $800 each. Buyers cannot tell if a used car is reliable or is a lemon. Based on this information, what is the likely outcome in the market for used cars? A) Most used cars offered for sale will be lemons. B) Both good used cars and lemons will sell for $4,500 each. C) Only lemons will sell, for $800 each. D) Both good used cars and lemons will sell for $1,000 each.