Figure 21-19
-Refer to Figure 21-19. Assume that the consumer depicted in the figure has an income of $20. The price of Skittles is $2 and the price of M&M's is $2. The consumer's optimal choice is point
A)A.
B)B.
C)C.
D)D.

Question

Figure 21-19 
-Refer to Figure 21-19. Assume that the consumer depicted in the figure has an income of $20. The price of Skittles is $2 and the price of M&M's is $2. The consumer's optimal choice is point
A)A. 
B)B. 
C)C. 
D)D.

Quizplus · Accepted Answer

To determine the optimal choice, we need to find the point where the budget line (the line connecting the two points on the horizontal and vertical axis corresponding to the amount of Skittles and M&M's that can be purchased with the given income) is tangent to the highest possible indifference curve (the curve representing all the combinations of Skittles and M&M's that give the consumer the same level of satisfaction). Point B is the only point that satisfies this condition. At point A, the consumer can still increase their satisfaction by consuming more M&M's. At point C, the consumer can still increase their satisfaction by consuming more Skittles. At point D, the budget line intersects with a lower indifference curve, meaning that the consumer can achieve the same level of satisfaction while spending less money (by purchasing fewer Skittles and M&M's). Therefore, the optimal choice is B.

Figure 21-19 -Refer to Figure 21-19. Assume That the Consumer Depicted in Consumer