What is a circular flow diagram?
What will be an ideal response?
Economists have designed a system of national accounts that measures GDP in four equivalent ways - production, expenditure, income, and factors. The circular flow diagram provides a simple visual way of remembering the relationships among these four equivalent systems. Firms on the left produce goods and services (production). Households on the right pay to buy those goods and services (expenditure). Firms pay households to use households' capital and labor (income). Capital and labor are put to use by firms (factors of production). The accounting system is set up so that all four sets of flows are equal in value.
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A good is path dependent when
A) it can only be used in one way. B) people who move location follow the path of people who moved before them. C) consumers get utility from consuming goods that others are consuming, such as restaurants. D) the first technology that was adopted has an advantage over a better technology that came later.
In long-run monopolistic competition,
a. economic profit is zero b. P = MC = ATC c. P = ATC at the minimum point on the ATC d. normal profit is zero e. the demand curve is tangent to the MC curve