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Chapter 33: Q.18 (page 804)

Why does the United States not have an absolute advantage in coffee?

Short Answer

Expert verified

Because it does not have the required climate.

Step by step solution

01

Step 1. Definition

Absolute advantage refers to the ability of a person, firm, or region to produce a product at a comparatively lower cost or to produce more output at the same cost.

02

Step 2, Explanation

The US does not have an absolute advantage in the production of Coffee because it does not possess the climate required for coffee production. An ideal temperature between 20°to27°Celsius is required along with a rainfall of 100 cm to 200 cm annually.

These conditions are not present in the US, thus it cannot have an absolute advantage in coffee production.

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Most popular questions from this chapter

Can a nation’s comparative advantage change over time? What factors would make it change?

Are the gains from international trade more likely to be relatively more important to large or small countries?

In France it takes one worker to produce one sweater, and one worker to produce one bottle of wine. In Tunisia it takes two workers to produce one sweater, and three workers to produce one bottle of wine. Who has the absolute advantage in production of sweaters? Who has the absolute advantage in the production of wine? How can you tell?

Are differences in geography behind the differences in absolute advantages?

France and Tunisia both have Mediterranean climates that are excellent for producing/harvesting green beans and tomatoes. In France it takes two hours for each worker to harvest green beans and two hours to harvest a tomato. Tunisian workers need only one hour to harvest the tomatoes but four hours to harvest green beans. Assume there are only two workers, one in each country, and each works 40 hours a week.

a. Draw a production possibilities frontier for each country. Hint: Remember the production possibility frontier is the maximum that all workers can produce at a unit of time which, in this problem, is a week.

b. Identify which country has the absolute advantage in green beans and which country has the absolute advantage in tomatoes.

c. Identify which country has the comparative advantage.

d. How much would France have to give up in terms of tomatoes to gain from trade? How much would it have to give up in terms of green beans?
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