The consumer's optimal purchase of any two goods is the point where ?
Correct answer: C. the consumer reaches the highest indifference curve subject to remaining on the budget constraint
- A. the budget constraint crosses the indifference curve
- B. the two highest indifference curves cross
- C. the consumer reaches the highest indifference curve subject to remaining on the budget constraint
- D. the consumer has reached the highest indifference curve
Explanation
The consumer chooses the highest indifference curve that can still be reached with the available income. At an interior optimum, this curve is tangent to the budget constraint.
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