The optimal consumption bundle is the point representing a consumption-leisure pair that is on the
A) lowest possible indifference curve and is on or outside the consumer's budget constraint.
B) lowest possible indifference curve and is on or inside the consumer's budget constraint.
C) highest possible indifference curve and is on or outside the consumer's budget constraint.
D) highest possible indifference curve and is on or inside the consumer's budget constraint.
E) lowest possible indifference curve that maximizes total utility.

Question

Quizplus · Accepted Answer

The optimal consumption bundle is the point at which the highest possible indifference curve (representing the highest level of utility) is tangent to the budget constraint. This ensures that the consumer is maximizing utility while staying within their budget constraint. Therefore, the correct answer is D, which is the highest possible indifference curve and is on or inside the consumer's budget constraint.

The Optimal Consumption Bundle Is the Point Representing a Consumption-Leisure