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Scenario: Music Downloads and Streamed Movies
Phillip has an income of $300 per month, which he uses to purchase music downloads (MD) and streamed movies (SM). Each music download costs $1 and each streamed movie costs $5.
-(Scenario: Music Downloads and Streamed Movies) Read the scenario Music Downloads and Streamed Movies. Phillip's optimal consumption bundle will be one whose:
A) budget line is tangent to his highest indifference curve.
B) budget line intersects his highest indifference curve.
C) budget line intersects the music download axis.
D) indifference curve intersects the streamed movies axis.

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Quizplus · Accepted Answer

Phillip's optimal consumption bundle is where his budget line is tangent to his highest indifference curve, indicating the highest level of satisfaction he can achieve given his budget constraint.

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