When a Consumer Is Purchasing the Best Combination of Two

question 151

Multiple Choice

When a consumer is purchasing the best combination of two goods, X and Y, subject to a budget constraint, we say that the consumer is at an optimal choice point. A graph of an optimal choice point shows that it occurs

• A)along the highest indifference curve.
• B)along the lowest budget constraint.
• C)where the indifference curve is tangent to the budget constraint.
• D)All of the above are correct.

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Definitions:

Increasing Rate

Describes a situation where a quantity or metric, such as inflation, interest rates, or population, is growing over time.

Variable Cost

A cost that changes in proportion to the level of output or activity.

Fixed Cost

Fixed charges that stay the same no matter the production or sales volume, like rental costs, salary payments, and insurance rates.

Composition

The way in which different components or elements are organized or arranged.