The table below shows the bushels of wheat and the bottles of beer that North and South Dakota can produce per day of labor under two different hypothetical situations (Cases I and II). $$\begin{array} { | l | c | c | c | c | }
\hline & { \text { Case I } } & & { \text { Case II } } \
\hline & \text { South Dakota } & \text { North Dakota } & \text { South Dakota } & \text { North Dakota } \
\hline \text { Wheat (bushels) } & 4 & 1 & 3 & 1 \
\hline \text { Beer bottles) } & 1 & 2 & 4 & 2 \
\hline
\end{array}$$ For case II,in what range must the "international" price of wheat fall? (i.e.,if North and South Dakota trade only with each other,what is the possible range of prices?)
A)Between 1 bushel of wheat = 4/3 bottles of beer and 1 bushel of wheat = 2 bottles of beer
B)Between 1 bushel of wheat = 3/4 bottles of beer and 1 bushel of wheat = 2 bottles of beer
C)Between 1 bushel of wheat = 3/4 bottles of beer and 1 bushel of wheat = ½ bottles of beer
D)none of the options

Question

The table below shows the bushels of wheat and the bottles of beer that North and South Dakota can produce per day of labor under two different hypothetical situations (Cases I and II). $$\begin{array} { | l | c | c | c | c | } 
\hline & { \text { Case I } } & & { \text { Case II } } \
\hline & \text { South Dakota } & \text { North Dakota } & \text { South Dakota } & \text { North Dakota } \
\hline \text { Wheat (bushels) } & 4 & 1 & 3 & 1 \
\hline \text { Beer bottles) } & 1 & 2 & 4 & 2 \
\hline
\end{array}$$ For case II,in what range must the "international" price of wheat fall? (i.e.,if North and South Dakota trade only with each other,what is the possible range of prices?)
A)Between 1 bushel of wheat = 4/3 bottles of beer and 1 bushel of wheat = 2 bottles of beer
B)Between 1 bushel of wheat = 3/4 bottles of beer and 1 bushel of wheat = 2 bottles of beer
C)Between 1 bushel of wheat = 3/4 bottles of beer and 1 bushel of wheat = ½ bottles of beer
D)none of the options

Quizplus · Accepted Answer

In Case II, South Dakota's opportunity cost of producing 1 bushel of wheat is 4/3 bottles of beer (since they can produce 3 bushels of wheat or 4 bottles of beer). North Dakota's opportunity cost of producing 1 bushel of wheat is 2 bottles of beer (since they can produce 1 bushel of wheat or 2 bottles of beer). Therefore, the international price of wheat must fall between these opportunity costs for both states to benefit from trade.

The Table Below Shows the Bushels of Wheat and the Bottles