At the best affordable point,which statement is true?
A)The slope of the indifference curve equals the slope of the budget line.
B)The marginal rate of substitution between two goods equals their absolute price.
C)The highest affordable indifference curve has the same intercept as the budget line.
D)Other points on the same indifference curve are affordable but not preferred.
E)Some income is not spent.

Question

Quizplus · Accepted Answer

At the best affordable point, the consumer is maximizing their utility given their budget constraint. This means that the slope of the indifference curve (representing the consumer's preferences) must equal the slope of the budget line (representing the prices and the consumer's budget). Therefore, statement A is correct. Statement B is incorrect because the marginal rate of substitution equals the ratio of the prices, not their absolute values. Statement C is incorrect because the highest affordable indifference curve may have a different intercept than the budget line. Statement D is incorrect because all points on the same indifference curve provide the same level of utility, so if one point is preferred, all other points on the same indifference curve are preferred as well. Statement E is incorrect because if the consumer is at the best affordable point, all of their income must be spent on the goods they are consuming.

At the Best Affordable Point,which Statement Is True