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The highest indifference curve that can be achieved, given a budget line: question 7 options:

a) will cross the budget line more than once.
b) will not touch or intersect the budget line.
c) will be tangent to the budget line.
d) will touch the budget line twice without intersecting it.

User Rax Weber
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1 Answer

7 votes

Final answer:

The correct answer is option c. The highest indifference curve given a budget line will be tangent to the budget line at a single point, representing the optimal combination of goods within the consumer's budget.

Step-by-step explanation:

Within the realm of consumer choice theory, the question pertains to the highest level of utility a consumer can achieve given their budget constraint. The highest indifference curve that can be achieved, given a budget line, is the one that is tangent to the budget line at a single point, representing the most preferred combination of goods that a consumer can afford.

This point of tangency signifies the highest level of satisfaction (utility) attainable without exceeding the consumer's budget.

Any higher indifference curves, which would provide greater utility, do not intersect or touch the budget line because those combinations of goods are unaffordable. Conversely, lower indifference curves intersect the budget line at two points but are not the highest attainable curves as there exists a higher curve touching at just one point of tangency. Thus, the correct option is that the highest achievable indifference curve will be tangent to the budget line.

User Marsden
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