Assume that a combination of two goods reflects a point of tangency between the budget line and an indifference curve.In this situation, which of the following is incorrect?
A)Consumer equilibrium has been achieved.
B)All available income has been spent.
C)Utility can be increased by consuming less of both goods.
D)The optimal consumption bundle has been reached.

Question

Quizplus · Accepted Answer

If a combination of two goods reflects a point of tangency between the budget line and an indifference curve, it means that the consumer is maximizing their utility given their income and the prices of the goods. Therefore, option A, B, and D are correct. However, option C is incorrect because consuming less of both goods could move the consumer away from the point of tangency, and result in a decrease in utility.

Assume That a Combination of Two Goods Reflects a Point