Lawyers generally earn much higher incomes than fast food workers. How would we use the Circular Flow to explain this?

Question

A. All workers sell their labor in the resource market, and lawyers do more physically demanding work than fast food workers
B. The government sets wages for lawyers but not wages for fast food workers
C. All workers sell their human capital in the resource market, and lawyers typically have more human capital than fast food workers
D. Households sell land to firms in the resource market, and lawyers usually live in bigger houses with bigger yards than fast food workers

Answer 1

The best explanation using the Circular Flow model for why lawyers generally earn much higher incomes than fast food workers is:

C. All workers sell their human capital in the resource market, and lawyers typically have more human capital than fast food workers.

This option highlights the concept that lawyers typically possess a higher level of education, specialized training, and skills (human capital) that enable them to command higher salaries compared to fast food workers, who generally require less education and training. The Circular Flow model includes the interaction between households and firms in the resource market, where the value of labor is largely determined by the skills and education workers possess.