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Economics

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7. In the circular-flow diagrams, does each of the following transactions take place in a product market or in a factor market? Which direction does the product or factor flow (between firms and households)? Which direction does the payment flow?

          a. Sam pays a storekeeper €2 for a liter of milk.

          b. Sally earns €4 per hour working at a restaurant.

          c. Susan spends €6 to see a film at the cinema.

          d. Stuart receives $10,000 in dividends from his shares in Microsoft corporation.

8. One common assumption in economics is that the products of different firms in the same industry are indistinguishable.

    a. Is this a reasonable assumption for restaurant meals? Explain your answer.

    b. Is this a reasonable assumption for “commodity” products like copper or gold? Explain your answer.