Suppose labor productivity differences are the only determinants of comparative advantage, and Brazil and Chile both produce only coffee and sugar. In Chile, either 5 units of coffee or 2 units of sugar can be produced in one day. In Brazil, a day of labor produces either 2 units of coffee or 1 unit of sugar. What is the opportunity cost of producing coffee in Chile?
a. Half a pound of sugar
b. Two-fifth of a pound of sugar
c. 2 pounds of sugar
d. One-third of a pound of sugar
e. 4 pounds of sugar
b
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What will be an ideal response?
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a. 15 percent b. 13 percent c. 9 percent d. 5 percent e. 4 percent
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One major problem with concentration ratios is that they fail to take into account:
A. The localized market for products B. Excess capacity in production C. Price leadership D. Mutual interdependence