Figure: Kristin's Budget Line
(Figure: Kristin's Budget Line) Look at the figure Kristin's Budget Line.The price of a cup of cappuccino is $3, and the price of an apple is $1.Given her income and the prices of the two goods, which of the following consumption bundles could Kristin consume?

Question

Quizplus · Accepted Answer

The best choice(s) for Kristin are the points that lie on the budget line and provide the highest level of utility. Point A (20 cappuccinos and 10 apples) is not affordable given her income, as it falls outside the budget line. Point C (15 cappuccinos and 20 apples) is affordable but does not provide the highest level of utility, as a point on a higher indifference curve can be reached without exceeding the budget constraint. Point D (10 cappuccinos and 40 apples) is also affordable, but it provides less utility than point B (15 cappuccinos and 15 apples), which is on the highest possible indifference curve that touches the budget line. Therefore, the best choice for Kristin is point B.