Executives at Leonesse Cellars, a premium winery in Southern California, were su
ID: 1123369 • Letter: E
Question
Executives at Leonesse Cellars, a premium winery in Southern California, were surprised to learn that shipping wine by sea to some cities in Asia was less expensive than sending it to the East Coast of the United States, so they started shipping to Asia Source: (David Armstrong, "Discount Cargo Rates Ripe for the T 2005). Taking, San Francisco Chronicle, August28, Because of the large U.S. trade imbalance with major Asian nations, cargo ships arrive at West Coast seaports fully loaded but return to Asia half to completely empty Use the concept of opportunity cost to help explain the differential shipping rates Shipping wine to Asia is less expensive than transporting wine to the East Coast because OA. the price a shipping firm could have earned by transporting other cargo is high. B. O C. D. E. the cost of ships in sea transportation is a sunk cost the value of wine to consumers in Asia is higher than on the East Coast. the value of the next best use of ships from the West Coast to Asia is low. the incremental cost of another shipment to Asia is decreasing (Explanation / Answer
D. the value of the next best use of ships from the West Coast to Asia is low.
Because the ships are half loaded, they are earning nothing. When they are loaded with wine, there is some increse in income and it is better over its alternative use of half loaded ships.
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.