Figure: Consumer Equilibrium III (Figure: Consumer Equilibrium III) Look at the figure Consumer Equilibrium III.Given the figure and the budget constraint, Kurt would maximize his utility:
A)at point B with the consumption of Q6 and Q₃.
B)at point E with the consumption of Q₁ and Q7.
C)at point F with the consumption of Q5 and Q4.
D)at point E with the consumption of Q5 and Q₂.

Question

Figure: Consumer Equilibrium III   (Figure: Consumer Equilibrium III) Look at the figure Consumer Equilibrium III.Given the figure and the budget constraint, Kurt would maximize his utility:
A)at point B with the consumption of Q6 and Q₃. 
B)at point E with the consumption of Q₁ and Q7. 
C)at point F with the consumption of Q5 and Q4. 
D)at point E with the consumption of Q5 and Q₂.

Quizplus · Accepted Answer

Kurt would maximize his utility at point E, where the budget constraint is tangent to his indifference curve. At this point, the marginal rate of substitution (MRS) between goods Q5 and Q2 equals the price ratio (the slope of the budget constraint). This is the point where Kurt is getting the most utility for his money. The consumption bundle at point E is Q5 and Q2. None of the other points satisfy the condition of the MRS equaling the price ratio.