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Average total cost is $200 for a given output, total fixed cost is 100 and average variable cost is 140. What is the quantity being produced 12.
11. Average total cost is $200 for a given output, total fixed cost is 100 and average variable cost is 140. What is
the quantity being produced
12. Suppose Bill views butter (b) and margarine (m) as perfectly substitutable for each other.
His utility function is U(b,m)=b+m
If butter costs $2 per package, while margarine costs only $1, and Bill has a $20 budget to spend for the
month, how many packages of butter and margarine will he choose? Show all your work.
hint: To answer this question, you may start from i. drawing budget line with given prices and income level ii.
drawing the indifference curve corresponding to his utility function given; then find the intersection point of
two curves, which will give you the Bill's optimal consumption allocation.
