For case II, let the international price be 1 bottle = 1 bushel. Derive South Dakota's "trading possibilities curve."

Question

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To derive the trading possibilities curve, we need to plot the maximum amount of wheat and wine that South Dakota can produce using all its resources.

With the international price of 1 bottle = 1 bushel, South Dakota can either produce 1000 bottles of wine or 1000 bushels of wheat with its resources. Thus, the trading possibilities curve will be a straight line connecting these two points.

Option C shows this straight line connecting the points (0, 1000) and (1000, 0). Any point on this line represents a combination of wine and wheat that South Dakota can produce and still trade internationally at a rate of 1 bottle = 1 bushel.

The best choice for South Dakota depends on its comparative advantage. If South Dakota has a comparative advantage in producing one good over the other, it should specialize in that good and trade for the other. Without information about South Dakota's comparative advantage, we cannot determine the best choice from the given options.

For Case II, Let the International Price Be 1 Bottle