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Chapter 33: Q. 2. (page 802)

Brazil can produce 100 pounds of beef or 10 autos. In contrast the United States can produce 40 pounds of beef or 30 autos. Which country has the absolute advantage in beef? Which country has the absolute advantage in producing autos? What is the opportunity cost of producing one pound of beef in Brazil? What is the opportunity cost of producing one pound of beef in the United States?

Short Answer

Expert verified

It is clearly understood that Brazil has absolute advantage in producing beef whereas United states has absolute advantage in producing autos.

Step by step solution

01

Step 1. Meaning of absolute advantage.

If a country uses fewer resources to produce that good, it means that country has an absolute advantage in producing a good over another country which can be the result of a country's natural endowment.

02

Step 2. Which country has absolute advantage.

Here, Brazil can produce 100 pounds of beef at the same time United states can produce 40 pounds of beef. This resulted that 'Brazil has the absolute advantage in producing beef'. Whereas, when Brazil produces 10 autos at the same time United states can produce 30 autos. This resulted that 'United states has the absolute advantage in producing autos'.

Also, the opportunity cost of producing one pound of beef in Brazil is 1/10 of an autos whereas the opportunity cost of producing one pound of beef in the United states it is 3/4 of an auto.

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