Exhibit 10-2 Refer to Exhibit 10-2.Which indifference curve depicts a perfect substitute?
A) (1)
B) (2)
C) (3)
D) (4)

Question

Exhibit 10-2  Refer to Exhibit 10-2.Which indifference curve depicts a perfect substitute?
A) (1) 
B) (2) 
C) (3) 
D) (4)

Quizplus · Accepted Answer

Indifference curve (2) depicts a perfect substitute because it is a straight line, indicating that the consumer is willing to trade one good for the other at a constant rate regardless of the quantity consumed. Therefore, the best choice would be the one that gives the consumer the highest level of utility along this straight line, which would be the point where the budget line intersects with indifference curve (2).