Refer to the information provided in Figure 6.1 below to answer the questions that follow. Figure 6.1
-Refer to Figure 6.1. Assume Tom's budget constraint is AC. He does NOT spend his entire income at point
A) A.
B) B.
C) E.
D) D.

Question

Refer to the information provided in Figure 6.1 below to answer the questions that follow.  Figure 6.1
-Refer to Figure 6.1. Assume Tom's budget constraint is AC. He does NOT spend his entire income at point
A) A. 
B) B. 
C) E. 
D) D.

Quizplus · Accepted Answer

Tom's budget constraint is AC, which means that he has a fixed income and can only afford to buy combinations of X and Y along the line AC. Points A and B represent combinations of X and Y that Tom can afford but does not spend his entire income on. Point D is outside of Tom's budget constraint and is not affordable. Point E is within Tom's budget constraint but is not the best choice because it represents a combination of X and Y with fewer units of X and Y compared to points A and B. Therefore, the best choice is either A or B but since both are acceptable answers, the question does not specify a unique best choice.

Refer to the Information Provided in Figure 6