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Part $1$

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$$ Taking," San Francisco$$ Chronicle, August$28,2005).$

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.

Part $2$

Shipping wine to Asia is less expensive than transporting wine to the East Coast because

Part $3$

A$.$

the value of wine to consumers in Asia is higher than on the East Coast.

B$.$

the price a shipping firm could have earned by transporting other cargo is high.

C$.$

the cost of ships in sea transportation is a sunk cost.

D$.$

the incremental cost of another shipment to Asia is decreasing.

E$.$

the value of the next best use of ships from the West Coast to Asia is low.