How do firms and households interact within the context of the ...

[joesmith1212]

How do firms and households interact within the context of the circular flow model?
 
  What will be an ideal response?

Question 2

In the figure above, when the market is in equilibrium, total consumer surplus on all the CDs bought will be
 
  A) greater than 30 million.
  B) less than at any other price.
  C) 20 million.
  D) less than 15 million.

[abctaiwan]

Answer to Question 1

Households are the owners of the factors of production. Firms purchase these factors in the factor market. They use these factors to produce goods and services which are sold to households in the goods market. Households are paid for the services of the factors of production and use this income to pay for the goods and services.

Answer to Question 2

C