A consumer maximizes utility where the
A)budget line intersects an indifference curve
B)budget line is tangent to an indifference curve
C)distance between the budget line and an indifference curve is greatest
D)indifference curve farthest from the origin intersects the budget line twice
E)area between the indifference curve and the budget line is the greatest

Question

Quizplus · Accepted Answer

A consumer maximizes utility where the budget line is tangent to an indifference curve because at that point, the consumer is consuming the combination of goods that gives them the highest level of satisfaction, given their budget constraint. Any point below the indifference curve is not preferred, while any point above it is unaffordable, making the point of tangency the optimal choice.

A Consumer Maximizes Utility Where the