In the simple circular-flow diagram,households
A)are the only decision makers.
B)own the factors of production.
C)are buyers of inputs.
D)consume only some of the goods and services that firms produce.

Question

Quizplus · Accepted Answer

In the simple circular-flow diagram, households are the owners of the factors of production, which include land, labor, capital, and entrepreneurship. Therefore, choice B is correct. Choice A is incorrect because firms are also decision makers as they decide what goods and services to produce, how much to produce, and at what price to sell them. Choice C is incorrect because households are not buyers of inputs, but rather buyers of goods and services produced by firms. Choice D is incorrect because households consume all of the goods and services that firms produce, not just some of them.

In the Simple Circular-Flow Diagram,households