Suppose that Brazil and Peru exchange coffee and leather. Brazil can produce both coffee and leather more efficiently than Peru, but Brazil can produce coffee more efficiently than leather. Comparative advantage states that:
A) Brazil should produce both coffee and leather and not trade.
B) Brazil should produce coffee, Peru should produce leather, and both countries should trade.
C) Brazil should produce leather, Peru should produce coffee, and both countries should trade.
D) Peru should produce both coffee and leather and not trade.
Ans: B) Brazil should produce coffee, Peru should produce leather, and both countries should trade.
You might also like to view...
The federal income tax code of the United States is
A) progressive. B) proportional. C) regressive. D) progressive for individuals but proportional for married couples.
Which of the following could contribute to a rise in GDP yet may not be economically beneficial?
a. building schools b. water treatment plant construction c. tobacco sales d. airport construction
Most businesses in the world start as
a. sole proprietorships b. general and limited partnerships c. subchapter S corporations d. C corporations e. limited liability corporations or partnerships
Suppose it takes Dan 5 minutes to make a sandwich and 15 minutes to make a smoothie, and it takes Tracy 6 minutes to make a sandwich and 12 minutes to make a smoothie. Which of the following statements is correct?
A. Tracy should specialize in sandwiches and smoothies. B. Dan should specialize in sandwiches, and Tracy should specialize in smoothies. C. Dan should specialize in both sandwiches and smoothies. D. Dan should specialize in smoothies, and Tracy should specialize in sandwiches.