Which of the Following Statements Is Correct

question 28

Multiple Choice

Which of the following statements is correct?

• A) To achieve maximum attainable utility, always select a portfolio on a person's highest indifference curve.
• B) To achieve maximum utility, select the portfolio with the lowest risk.
• C) To achieve the highest utility, first choose the best efficiency frontier and then select the highest returns portfolio.
• D) To achieve the highest utility, select the portfolio where the highest attainable indifference curve is tangential to the efficiency frontier.

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Definitions:

Perfect Substitutes

Goods for which the indifference curves are straight lines; the marginal rate of substitution of one good in place of another good is constant, regardless of how much of each an individual consumes.

Consumer Equilibrium

A state where an individual consumer has optimized their utility, given their budget constraints, choosing the best possible goods or service mix.

Budget Constraint

The limits placed on the consumption choices of individuals by their income and the prices of goods and services.

Utility

An indicator of pleasure or contentment obtained from the acquisition and use of products and services.