The towns of Mattoon and Charleston can produce one of two goods: books and bagels. In Charleston factories, 6 laborers can produce 100 books in an hour, while 12 laborers can produce 400 bagels in an hour.
(i) What is the cost of producing books in Charleston?
(ii) Suppose the cost of producing books in Mattoon is 3 bagels per book. Which town should specialize in bagel production and which town should specialize in book production?
(i) In Charleston, 12 laborers can produce either 200 books or 400 bagels in one hour. Therefore, 1 book costs 4 bagels.
(ii) If 1 book costs 3 bagels in Mattoon, then Mattoon is the low-cost book producer. Mattoon should specialize in book production, and Charleston should specialize in bagel production.
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