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.

Question

Quizplus · Accepted Answer

The optimal consumption bundle maximizes utility, which occurs at the highest possible indifference curve. However, the consumer must also remain within their budget constraint, which means the optimal bundle must also be on or inside the budget constraint. Therefore, the correct answer is D.

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