Problem_set2_-_solutions

Problem_set2_-_solutions - EC201 Introduction to...

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EC201 Introduction to Microeconomics (G.Lepori) Spring 2008 1 Name:_______________________ Student Number:_______________ Problem set # 2 (Due on Tuesday 01/22/2006, by 12:40pm) Please staple all the pages together. Circle the most appropriate answer to the following questions (each question is worth 1 point): 1) In the circular-flow diagram, a. taxes flow from households to firms, and transfer payments flow from firms to households. b. income paid to the factors of production flows from firms to households, and sales revenue flows from households to firms. c. resources flow from firms to households, and goods and services flow from households to firms. d. inputs and outputs flow in the same direction as the flow of dollars, from firms to households. ANS: B 2) Which of the following statements about the circular-flow diagram is correct? a. One must imagine that the economy operates without money in order to make sense of the diagram. b. The diagram leaves out details that are not essential for understanding the economic transactions that occur between households and firms. c.
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Problem_set2_-_solutions - EC201 Introduction to...

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