A point where the budget line is just touching an indifference curve at one point is
A) the least affordable point.
B) the best affordable point.
C) on the lowest attainable indifference curve.
D) Both answers B and C are correct.
E) Both answers A and C are correct.

Question

Quizplus · Accepted Answer

When the budget line is just touching an indifference curve at one point, it means that the consumer is spending all of their available income on purchasing a combination of goods that gives them the highest level of satisfaction (i.e. on the highest indifference curve they can afford). Therefore, answer B is correct as it identifies this point as the best affordable point. Answer C is also correct, but it does not provide information regarding affordability. Answer A is incorrect as this point is not necessarily the least affordable, but rather the point where the budget constraint and preferences just meet.

A Point Where the Budget Line Is Just Touching an Indifference