Suppose a manager's preferences depend only on profit.Such a manager will then have an indifference curve that:
A) is tangent to the profit curve somewhere between quantities of 0 and 2.5.
B) is tangent to the profit curve somewhere between quantities of 2.5 and 5.
C) is tangent to the profit curve at a quantity exactly equal to 2.5.
D) intersects the profit curve at a quantity exactly equal to 5.

Question

Suppose a manager's preferences depend only on profit.Such a manager will then have an indifference curve that: 
A) is tangent to the profit curve somewhere between quantities of 0 and 2.5. 
B) is tangent to the profit curve somewhere between quantities of 2.5 and 5. 
C) is tangent to the profit curve at a quantity exactly equal to 2.5. 
D) intersects the profit curve at a quantity exactly equal to 5.

Quizplus · Accepted Answer

Since the manager's preference depends only on profit, the indifference curve will be tangent to the profit curve at the point where the profit is maximized. Therefore, the indifference curve will be tangent to the profit curve at the quantity where profit is maximum, i.e., 2.5 units. Hence, the answer is C.

Suppose a Manager's Preferences Depend Only on Profit