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44) A firm produces a good and generates $5 million in receipts. Wages are $3 million, rent is $500,000, and interest payments are $1 million. Then

A) profits are $500,000, the cost of production is $4.5 million, and households receive income equal to $4.5 million.

B) profits are $500,000, the cost of production is $5 million, and households receive income equal to $4.5 million.

C) profits are $500,000, the cost of production is $5 million, and households receive income equal to $5 million.

D) profits are $500,000, the cost of production is $5 million, and households receive income equal to $3.5 million.

45) Households receive a total income of $5 million. Of this, $3.5 million are wages received for labor services, $1 million are rental payments, and $250,000 are interest payments received. What are the costs of production and profits equal to respectively?

A) $5 million; $500,000

B) $5 million; $250,000

C) $4.75 million; $250,000

D) $4.75 million; 0

46) The dollar value of final output

A) is less than total income.

B) is equal to total income.

C) is greater than total income.

D) equals profits.

47) Which of the following statements is NOT true about the relationship between the dollar value of total output and total income?

A) The dollar value of total output equals total income because the spending of one group is the income of another.

B) The dollar value of total output equals total income because profit is considered a cost of production.

C) The dollar value of total output equals total income because profit is not considered a cost of production.

D) The dollar value of total output equals total income because of the economic definition of profit.

48) How much of each dollar spent by a consumer ultimately becomes income to someone else?

A) 100 percent

B) 67 percent

C) It depends on how much labor was needed to produce the good the consumer buys.

D) It depends on how much overhead there is in the distribution channel that delivers the good from the manufacturer to the consumer.

49) The two sectors of the economy in the simple circular flow model are

A) the employed and the unemployed.

B) foreign markets and domestic markets.

C) households and businesses.

D) the private sector and the public sector.

50) In the simple circular flow model, total income in the United States must equal

A) wages + rents + interest + profits.

B) the total monetary value of all final goods and services.

C) the yearly amount earned by our nation's resources.

D) All of the above are correct.

51) Which of the following would most likely be defined as a final good or service?

A) iron ore

B) wheat

C) a personal computer

D) lumber

52) In the simple circular flow,

A) businesses trade goods and services for resources in the product market.

B) consumers trade resources for goods and services in the factor market.

C) consumers trade goods and services for monetary payments in the factor market.

D) producers trade goods and services for monetary payments in the product market.

53) In the product market,

A) businesses trade goods and services for resources.

B) consumers trade resources for goods and services.

C) consumers trade goods and services for resources.

D) consumers trade monetary payments for goods and services.

54) Which of the following occurs in the factor market?

A) firms exchange goods and services for resources.

B) households exchange resources for goods and services.

C) households exchange money for goods and services.

D) firms exchange money for resources.

55) Profits are part of the

A) total income.

B) monetary value of output.

C) final consumer goods.

D) factor services.

56) Explain the concept of the circular flow.

57) Why must total income be identical to the dollar value of total output?

58) Where does profit enter in the circular flow? Why?

 

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