If the combination of two goods occurs at a point of tangency between the budget line and an indifference curve, then:
A)utility has been maximized.
B)some available income has not been spent.
C)utility can be decreased by consuming more of both goods.
D)utility can be increased by consuming more of one good and less of the other.

Question

Quizplus · Accepted Answer

At the point of tangency between the budget line and an indifference curve, the consumer is maximizing their utility. Any other combination of the two goods would either be too expensive or provide less satisfaction. Therefore, utility has been maximized at this point.

If the Combination of Two Goods Occurs at a Point