The consumer's optimal purchase of any two goods is the point where the
A) budget constraint crosses the indifference curve.
B) two highest indifference curves cross.
C) consumer reaches the highest indifference curve subject to remaining on the budget constraint.
D) consumer has reached the highest indifference curve.

Question

Quizplus · Accepted Answer

The consumer's optimal purchase is where the highest indifference curve is tangent to the budget constraint. This occurs when the consumer has reached the highest indifference curve subject to remaining on the budget constraint. Therefore, the correct answer is C.

The Consumer's Optimal Purchase of Any Two Goods Is the Point