Firms choose the highest indifference curve they can obtain given the lowest possible budget line.

Question

Quizplus · Accepted Answer

The statement is true. Firms aim to maximize their utility by choosing the highest indifference curve possible, subject to their budget constraint, which is represented by the budget line. The budget line shows the combination of goods that the firm can afford to buy given its income and the prices of the goods. Therefore, the firm will choose the highest indifference curve that it can obtain while staying within its budget constraint.

Firms Choose the Highest Indifference Curve They Can Obtain Given