When hiring the factors of production to produce output, firms:
A) show little concern for the consumption decisions of households.
B) often waste many factors by not producing efficiently.
C) generate the income for households to consume their output.
D) directly contribute to the inflation rate.

Question

Quizplus · Accepted Answer

Firms hire factors of production (like labor, capital, and land) to produce goods and services. The payments made to these factors (such as wages, rent, and interest) become the income for households. This income then enables households to purchase and consume the output produced by firms, creating a circular flow of economic activity.

When Hiring the Factors of Production to Produce Output, Firms