Select the true statements that follow.When the indifference curve is tangent to the budget constraint, a consumer:
(i) cannot be made better off without increasing his or her income
(ii) is consuming the best combination of two goods that are attainable
(iii) must be on a linear indifference curve
A)(i) only
B)(i) and (ii)
C)(i) and (iii)
D)(ii) and (iii).

Question

Quizplus · Accepted Answer

When the indifference curve is tangent to the budget constraint, it represents that the consumer is consuming the best combination of two goods that are attainable given their income and the prices of the goods. Therefore, statement (ii) is true. Since the consumer cannot be made better off without increasing his or her income, statement (i) is also true. However, there is no requirement for the indifference curve to be linear, so statement (iii) is false.

Select the True Statements That Follow