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QUESTION:

he circular-flow model

The following diagram presents a circular-flow model of a simple economy. The outer set of arrows (shown in green) shows the flow of dollars, and the inner set of arrows (shown in red) shows the corresponding flow of inputs and outputs.
 One set of outer arrows shows how dollars flow from Households to Markets for Goods and Services, and then from Markets for Goods and Services to Firms. Then outer arrows show how dollars flow from Firms to Markets for Factors of Production, and then back to Households. The inner set of arrows shows how inputs and outputs flow from Markets for Goods and Services to Households, and then to Markets for Factors of Productions. Then inner arrows show how the inputs and outputs flow from Markets for Factors of Productions to Firms, and then back to Markets for Goods and Services. 
Based on this model, households earn income when    purchase    in factor markets.
Suppose Lucia earns $625 per week working as a math tutor for A-Plus Tutoring. She uses $8 to take a spin class at Silver’s Gym. Silver’s Gym pays Kenji $225 per week to work as a trainer. Kenji uses $125 to purchase tutoring services from A-Plus Tutoring.
Identify whether each of the following events in this scenario occurs in the factor market or the product market.
Event
Factor Market
Product Market
Lucia earns $625 per week working for A-Plus Tutoring.
Kenji spends $125 to purchase tutoring services from A-Plus Tutoring.
Lucia spends $8 to take a spin class.
Which of the elements of this scenario represent a flow from a firm to a household? This could be a flow of dollars, inputs, or outputs. Check all that apply.

ANSWER:

Based on this model, households earn income whenfirms  Correct purchasefactors  Correct in factor markets.

Suppose Lucia earns $625 per week working as a math tutor for A-Plus Tutoring. She uses $8 to take a spin class at Silver’s Gym. Silver’s Gym pays Kenji $225 per week to work as a trainer. Kenji uses $125 to purchase tutoring services from A-Plus Tutoring.
Identify whether each of the following events in this scenario occurs in the factor market or the product market.
Event
Factor Market
Product Market
Lucia earns $625 per week working for A-Plus Tutoring.
Kenji spends $125 to purchase tutoring services from A-Plus Tutoring.
Lucia spends $8 to take a spin class.
Points:
1 / 1
Close Explanation
Explanation:
In this scenario, households sell factors of production in factor markets when Lucia supplies her labor to A-Plus Tutoring and when Kenji supplies his labor to Silver’s Gym. Moreover, a firm sells goods and services to a household in product markets when Silver’s Gym provides the spin class to Lucia and A-Plus Tutoring provides the tutoring services to Kenji.
Which of the elements of this scenario represent a flow from a firm to a household? This could be a flow of dollars, inputs, or outputs. Check all that apply.
Correct
Correct
Correct
Correct
Points:
1 / 1
Close Explanation
Explanation:
When Lucia (a household) supplies her labor to any firm, labor is an input (a factor of production) that flows from a household to a firm.
When the spin class is provided to Lucia (a household), the spin class is an output that flows from a firm to a household.
Silver’s Gym (a firm) pays Kenji (a household) $225 for his labor. Therefore, the $225 is a payment that flows from a firm to a household.
Kenji (a household) pays A-Plus Tutoring (a firm) $125 for tutoring services. Therefore, the $125 is a payment that flows from a household to a firm.

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