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. Which of the following statements is true?
a. Brazil has a comparative advantage in producing coffee.
b. Brazil has a comparative advantage in producing both coffee and sugar.
c. Chile has a comparative advantage in producing both coffee and sugar.
d. Neither Chile nor Brazil has a comparative advantage in producing coffee.
e. Brazil has a comparative advantage in producing sugar.
e
You might also like to view...
The characteristic from which all economic problems arise is
A) how to make a profit. B) political decisions. C) hunger. D) scarcity. E) providing a minimal standard of living for every person.
Since 1970, the world Gini ratio has ________ indicating that the world distribution of income has ________
A) risen; become more equal B) fallen; become more equal C) risen; become less equal D) not changed; not changed
Comparative advantage is a comparison among producers based on opportunity cost.
Answer the following statement true (T) or false (F)
Differentiate between "off-budget" deficit and the "on-budget" deficit