Answered: 2. An average worker in Brazil can…

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter33: International Trade

Section: Chapter Questions

Problem 2SCQ: Brazil can produce 100 pounds of beef or 10 autos. In contrast the United States can produce 40...

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2. An average worker in Brazil can produce an ounce of soybeans in 20 minutes and an ounce of coffee in 60 minutes, while an average worker in Peru can produce an ounce of soybeans in 50 minutes and an ounce of coffee in 75 minutes.

a) Who has the absolute advantage in coffee? Explain.

b) Who has the comparative advantage in coffee? Explain.

c) If the two countries specialize and trade with each other, who will import coffee? Explain.

d) Assume that the two countries trade and that the country importing coffee trades 2 ounces of soybeans for 1 ounce of coffee. Explain why both countries will benefit from this trade.

Definition Video Definition Ability of a country to produce more output with a given level of input or to produce the same level of output with a lower level of input as compared to the other countries. For example, if Country A produces 200 units with the help of 10 units of labor, and Country B produces 300 units with 10 units of labor, Country A has an absolute advantage in the production of the good. Video

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