Figure: Labor Supply and Welfare Reference: Ref 23-8 (Figure: Labor Supply and Welfare) Refer to the figure. The budget constraint is:

Question

Figure: Labor Supply and Welfare  Reference: Ref 23-8 (Figure: Labor Supply and Welfare) Refer to the figure. The budget constraint is:

Quizplus · Accepted Answer

The best choice for the worker is at point D, where the indifference curve is tangent to the budget constraint. At point D, the worker is maximizing their utility given their budget constraint, and they are able to consume more goods while also working more hours. Points A and B are not optimal because they are either below or above the budget constraint, and point C is not optimal because there is a higher indifference curve achievable within the budget constraint.