Assume a diagram in which a budget line is imposed on an indifference map.A consumer will maximize her utility:

A) at any point where the budget line and an indifference curve intersect.
B) at either point where the budget line intersects the horizontal and vertical axes.
C) where the budget line is tangent to an indifference curve.
D) where the ratio of the two product prices equals the reciprocal of the consumer's income.

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Vivek Goyal · Accepted Answer

Final Answer : C, Explanation :  The consumer will maximize her utility where the budget line is tangent to an indifference curve, which represents the highest level of satisfaction the consumer can achieve given her income and the prices of the goods. This is because at this point, the consumer is spending all of her income and allocating it in a way that she cannot increase her utility without decreasing her consumption of one good and increasing her consumption of the other. Any point that lies outside of the curve is unattainable given the budget constraint, and any point inside the curve represents a lower level of satisfaction. Therefore, the consumer will choose the point where the budget line is tangent to an indifference curve.

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