Julia consumes two goods X and Y. Each good costs $5 per unit. She has a budget of $40 at her disposal that she intends to spend on the two goods. Julia thinks she is currently maximizing her utility and operating at a point of tangency between her budget constraint and an indifference curve. She is currently consuming 3 units each of X and Y. Which of the following statements is true?
A) Julia is maximizing her utility.
B) Julia is operating at a point on her budget constraint that lies below and to the right (to the south-east) of the point of tangency between her budget constraint and the highest possible indifference curve.
C) Julia is operating at a point on her budget constraint that lies above and to the left (to the north-west) of the point of tangency between her budget constraint and the highest possible indifference curve.
D) Julia is not maximizing her utility and is operating at a point inside her opportunity set.

Question

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The Answer of Julia consumes two goods X and Y. Each good costs $5 per unit. She has a budget of $40 at her disposal that she intends to spend on the two goods. Julia thinks she is currently maximizing her utility and operating at a point of tangency between her budget constraint and an indifference curve. She is currently consuming 3 units each of X and Y. Which of the following statements is true?
A) Julia is maximizing her utility.
B) Julia is operating at a point on her budget constraint that lies below and to the right (to the south-east) of the point of tangency between her budget constraint and the highest possible indifference curve.
C) Julia is operating at a point on her budget constraint that lies above and to the left (to the north-west) of the point of tangency between her budget constraint and the highest possible indifference curve.
D) Julia is not maximizing her utility and is operating at a point inside her opportunity set.

Julia Consumes Two Goods X and Y