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Answer :
Final Answer:
Based on opportunity costs, Allan should specialize in producing scones, and Diana should specialize in producing muffins. Therefore, option b) Allan should specialize in producing scones and Diana should specialize in producing muffins is the correct choice.
Explanation:
To determine the optimal specialization based on opportunity costs, we need to compare the opportunity costs of producing muffins and scones for Allan and Diana. Opportunity cost refers to the value of the next best alternative that is foregone when a decision is made. If Allan specializes in producing scones, the opportunity cost of producing muffins is the number of scones he could have produced instead. Similarly, if Diana specializes in producing muffins, the opportunity cost of producing scones is the number of muffins she could have produced instead.
Comparing the opportunity costs, we find that if Allan specializes in producing scones, the number of muffins Diana could produce in the same time would be greater than if Allan specialized in muffins. Likewise, if Diana specializes in producing muffins, the number of scones Allan could produce in the same time would be greater than if Diana specialized in scones. Therefore, the optimal specialization is for Allan to produce scones and Diana to produce muffins. This ensures that they both produce the goods in which they have a comparative advantage, leading to increased overall production and efficiency.
Thus, option b) Allan should specialize in producing scones and Diana should specialize in producing muffins, maximizes total production of both muffins and scones.
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