The optimal consumption bundle is the point representing a consumption-leisure pair that is on the
A) lowest possible indifference curve and is on or outside the consumer's budget constraint.
B) lowest possible indifference curve and is on or inside the consumer's budget constraint.
C) highest possible indifference curve and is on or outside the consumer's budget constraint.
D) highest possible indifference curve and is on or inside the consumer's budget constraint.
E) lowest possible indifference curve that maximizes total utility.

Question

Quizplus · Accepted Answer

The optimal consumption bundle is the one that maximizes utility while still being affordable, which means that it lies on or inside the budget constraint. However, it should also be on the highest possible indifference curve, indicating the consumer's preference for more goods and leisure. Therefore, the correct answer is D, which states that the optimal consumption bundle is on the highest possible indifference curve and on or inside the consumer's budget constraint.

The Optimal Consumption Bundle Is the Point Representing a Consumption-Leisure