Question 1: The boiler in the heating plant at arctic College isdesigned to burn either fuel oil or coal. Suppose that one ton ofcoal, C, produces as many BTUs as 100 gallons of fuel oil, F. (a)Draw a typical isoquant for BTU production. (b) What is theelasticity of substitution between fuel oil and coal? (c) Supposethat fuel oil is $1.00 per gallon and coal is $80 per ton. Draw theoutput expansion path on the diagram and describe the marginal andaverage cost curves. (d) Repeat (c). assuming that the price ofcoal has increased to $120 per ton.
