In the circular flow model, households primarily:

• A. set prices for products in the product market
• B. sell goods and services directly to other households
• C. provide factors of production to firms and receive income in return
• D. pay taxes directly to firms

Answer: (C)

Verified step by step guidance

1. Understand the circular flow model, which illustrates how money, goods, services, and factors of production move between households and firms in an economy.
2. Identify the role of households in this model: households own and provide factors of production such as labor, land, and capital to firms.
3. Recognize that in return for providing these factors of production, households receive income in the form of wages, rent, interest, and profits.
4. Note that households use this income to purchase goods and services from firms in the product market, but they do not set prices or sell goods directly to other households.
5. Conclude that the primary role of households in the circular flow model is to provide factors of production to firms and receive income in return.