Based on the information provided, the best choice is:
Cropitia should specialize, in the production of ham and import cheese.
Here are the key reasons why:
1) The opportunity cost of producing 1 pound of cheese in Cropitia is 1.5 pounds of ham. This means cheese is more costly to produce in Cropitia compared to ham.
2) So Cropitia has a comparative advantage in producing ham at a lower cost relative to cheese. It would be inefficient for Cropitia to focus its limited resources on the higher cost good (cheese).
3) By specializing in ham, Cropitia can produce more ham overall with the same inputs and costs. Some ham production can then be traded for cheese with Bonovia.
4) Bonovia may have the opposite comparative advantage, where the opportunity cost of ham is higher than cheese. So Bonovia should specialize in cheese and trade with Cropitia.
5) Specializing in each good where there is a comparative advantage and trading the excess leads to greater overall production and utility. Both countries can benefit from specializing in what they can produce most efficiently.
The other choices do not recognize Cropitia's comparative advantage in ham and the gains from specialization and trade:
• Cheese and import ham: Even though Cheese can be imported, it is still relatively more costly to produce in Cropitia. Resources would be better focused on ham.
• Neither good and import both goods: Rather than produce neither good, specializing in ham based on the comparative advantage leads to greater output and welfare. Importing both goods is also inefficient.
• Both goods: Producing both goods is less efficient than specializing in the lower opportunity cost good (ham) and trading. Limited resources would be spread across multiple goods rather than focused on one good.
In summary, the key idea is that Cropitia should specialize in producing ham, where it has a comparative advantage, and import cheese in order to maximize production, reduce costs and increase overall utility. The opportunity cost information reveals Cropitia's comparative advantage in ham versus cheese.
Does this help explain the solution and economic reasoning behind it? Let me know if any part of the explanation is unclear or if you have any other questions!