Name:

1. In Massachuetts, the typical person spends $600 per month on food. They split expenditures between eating out (E), and all other food expenditures (F). A typical restaurant meal costs $20, and other food costs $1 per unit.

(a) (5 points) What is the equation for a typical budget constraint?

(b) (5 points) What is the opportunity cost of eating out?

(c) (5 points) Graph the budget constraint. (Draw your graph large, you'll be adding other things to this graph.)

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(d) (10 points) Assuming that the typical individual splits their expenditures evenly between eating out and other food consumption, what is the utility maximizing bundle for this individual?