If the combination of two goods occurs at a point of tangency between the budget line and an indifference curve:
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 has maximized utility given their budget constraint, as the marginal rate of substitution equals the price ratio.

If the Combination of Two Goods Occurs at a Point