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Chapter 19: Q2 (page 460)

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

Brazil has absolute advantage in Beef, and US in autos. Opportunity Cost of producing Beef is 1.5 autos & 10 autos in US & Brazil respectively.

Step by step solution

01

Given information

Production Possibilities are the combination of goods which can be produced by an economy.

CountryBeefAutos
US4030
Brazil10010
02

Definitions

Opportunity Cost is the cost of next best alternative foregone while choosing an alternative.

Absolute Advantage is when an economy can produce more quantity of a good as compared to other country.

03

Solution Explanation

US has absolute advantage in producing autos, as it can produce more autos (30 units) than Brazil (10 units).

Brazil has absolute advantage in producing Beef, as it can produce more beef (100 units) than US (40 units)

Opportunity cost of producing a unit beef is the amount of autos sacrificed for it.

Opportunity cost of Beef in US is 40 / 30 = 1.5 autos

Opportunity cost of Beef in Brazil is 100 / 10 = 10 autos

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Most popular questions from this chapter

In World Trade Organization meetings, what do

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In Germany it takes three workers to make one television and four workers to make one video camera. In Poland it takes six workers to make one television and 12 workers to make one video camera.

  1. Who has the absolute advantage in the production of televisions? Who has the absolute advantage in the production of video cameras? How can you tell?

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  3. Calculate the opportunity cost of producing one video camera in Germany and in Poland. Which country has a comparative advantage in the production of video cameras?

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  5. In what product should Germany specialize? In what product should Poland specialize?

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