When Jim is at his best affordable point,the budget line
A)is steeper than the highest attainable indifference curve.
B)is flatter than the highest attainable indifference curve.
C)does not touch the highest attainable indifference curve.
D)is tangent to the highest attainable indifference curve.
E)intersects the highest attainable indifference curve.

Question

Quizplus · Accepted Answer

When Jim is at his best affordable point, he is maximizing his utility given his budget constraint. The best affordable point occurs where the budget line is tangent to the highest attainable indifference curve, as this represents the point where the marginal rate of substitution (MRS) between the two goods equals the price ratio. Any point above this would mean that Jim could achieve a higher level of utility by spending more money, while any point below this would mean that Jim is not spending his money efficiently and could achieve a higher level of utility by reallocating his expenditures. Therefore, the correct answer is D, where the budget line is tangent to the highest attainable indifference curve.

When Jim Is at His Best Affordable Point,the Budget Line