Figure: Labor Supply and Welfare (Figure: Labor Supply and Welfare) Refer to the figure. Thebudget constraint is:

Question

Figure: Labor Supply and Welfare  (Figure: Labor Supply and Welfare) Refer to the figure. Thebudget constraint is:

Quizplus · Accepted Answer

The best choice is at point D because it maximizes both the individual's utility and earnings. At point D, the individual is consuming at point B on the indifference curve and working at point A on the labor supply curve. This point is the tangency point between the budget constraint AB and the highest indifference curve that is still tangent to the labor supply curve. Point D maximizes both utility and earnings, making it the best choice.