Figure 21-19
The following graph illustrates a representative consumer's preferences for marshmallows and chocolate chip cookies:

-Refer to Figure 21-19.Assume that the consumer has an income of $80.If the price of chocolate chips is $4 and the price of marshmallows is $4,the optimizing consumer would choose to purchase
A) 9 marshmallows and 6 chocolate chips.
B) 10 marshmallows and 10 chocolate chips.
C) 5 marshmallows and 5 chocolate chips.
D) 3 marshmallows and 9 chocolate chips.

Question

Figure 21-19
The following graph illustrates a representative consumer's preferences for marshmallows and chocolate chip cookies:
 
-Refer to Figure 21-19.Assume that the consumer has an income of $80.If the price of chocolate chips is $4 and the price of marshmallows is $4,the optimizing consumer would choose to purchase
A) 9 marshmallows and 6 chocolate chips. 
B) 10 marshmallows and 10 chocolate chips. 
C) 5 marshmallows and 5 chocolate chips. 
D) 3 marshmallows and 9 chocolate chips.

Quizplus · Accepted Answer

To determine the optimal consumption bundle, we need to find the point on the budget line where the consumer's indifference curve is tangent to the budget line.

At a price of $4 for both goods, the consumer's budget line is given by the equation:

4C + 4M = 80
C + M = 20

If we plot this budget line on the graph, we can see that it intersects with the indifference curve at point B, which represents consuming 10 marshmallows and 10 chocolate chips.

Therefore, the best choice for the consumer would be to purchase 10 marshmallows and 10 chocolate chips.

Figure 21-19 The Following Graph Illustrates a Representative Consumer's Preferences for Marshmallows