Final answer:
Comparative advantage dictates that Alpha should specialize in apple production while Beta should specialize in orange production. Given the terms of trade (1 apple for 2 oranges), both Alpha and Beta would benefit from specialization and trade, which aligns with answer option B.
Step-by-step explanation:
The student's question is a classic instance of comparative advantage and trade. Alpha can produce either 18 oranges or 9 apples an hour, whereas Beta can produce either 16 oranges or 4 apples an hour. When trade is set at 1 apple for 2 oranges, we must identify which country has the comparative advantage in producing each good.
To determine the comparative advantage, we calculate the opportunity cost of producing one unit of a good in terms of the other. For Alpha, the opportunity cost of 1 apple is 2 oranges (18 oranges / 9 apples), and for Beta, the opportunity cost of 1 apple is 4 oranges (16 oranges / 4 apples). Therefore, Alpha has a comparative advantage in producing apples since they give up fewer oranges to produce one apple, and Beta has a comparative advantage in producing oranges since they give up fewer apples to produce oranges.
Given the terms of trade (1 apple for 2 oranges), Alpha should specialize in apples and Beta should specialize in oranges. Both can benefit from this trade since Alpha can trade an apple for more than 2 oranges (the amount it would sacrifice to make its own) and Beta can trade 2 oranges for an apple, which is less than the 4 oranges it would have to give up to make its own apple. The correct answer is B: it is in the interest of both countries to specialize and trade with one another.