Multiple Choice
Scenario: Hawaii and South Carolina are trading partners. Hawaii has an absolute advantage in the production of both coffee and tea. The opportunity cost of producing 1 pound of tea in Hawaii is 2 pounds of coffee, and the opportunity cost of producing 1 pound of tea in South Carolina is 1/3 pound of coffee.
-Refer to the scenario above.Which of the following statements is true?
A) Hawaii should specialize in the production of both tea and coffee.
B) South Carolina should specialize in the production of both tea and coffee.
C) Hawaii should specialize in the production of tea, whereas South Carolina should specialize in the production of coffee.
D) Hawaii should specialize in the production of coffee, whereas South Carolina should specialize in the production of tea.
Correct Answer:
Verified
Correct Answer:
Verified
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