The circular flow model with government included would show that government
A. produces goods and services and sells them in the product market to generate net taxes.
B. obtains revenues in the product market and uses it to cover costs in the resource market.
C. controls economic resources and sells them in the resource market.
D. provides goods and services to businesses and households and pays for them with net taxes.
Answer: D
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If the distribution of water is a natural monopoly, then (i) multiple firms would likely each have to pay large fixed costs to develop their own network of pipes. (ii) allowing for competition among different firms in the water-distribution industry is efficient. (iii) a single firm can serve the market at the lowest possible average total cost
a. (i) and (ii) only b. (ii) and (iii) only c. (i) and (iii) only d. (iii) only
In considering economic profit in a market economy, it is correct to say that
A) there should never be any economic profit. B) economic profit will only occur, even in the short run, as a result of imperfect competition. C) economic profit performs an important function in allocating resources to their most highly valued uses. D) economic profit tends to reduce the production efficiency of the economy, leading to wasted resources.