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Cook onion in butter till tender. Stir in flour, 1/2 tsp salt and 1/8 tsp pepper. Add milk all at once. Cook and stir till thickened and bubbly, add cheese. Place potatoes in casserole dish and cover with sauce. Bake covered in a 350 degree oven for 35 minutes. Uncover and bake for 30 minutes more or until potatoes are tender.
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