he simple circular-flow diagram, which of the following is not true.

Question

a. Firms own the factors of production.
b. Land, labor, and capital flow from households to firms.
c. Households own the factors of production.
d. Households buy all the goods and services that firms produce.

Answer 1

In the simple circular-flow diagram, the statement that is not true is:

a. Firms own the factors of production.

In the circular-flow model, it is households that own the factors of production (land, labor, and capital). Firms utilize these factors, while households receive income for them (wages, rent, etc.) and purchase goods and services produced by firms.