Answer to Question #247635 in Macroeconomics for lavhe

Question

Within the mixed economy, _____________.

• A. households and firms depend on each other to generate their income
• B. both households and firms are directly involved in production
• C. firms generate income from the factor market
• D. households produce factors of production

Answer 1

Solution:

The correct answer is A. households and firms depend on each other to generate their income.

Within a mixed economy, households and firms depend on each other to generate their income through mutual co-existence. Households provide the factors of production to firms for which they are rewarded. On the other hand, firms use the factors of production provided by households to manufacture goods and services, and the income generated is distributed towards households and others.