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brazil has a comparative advantage in producing

If each country now specializes in one producing good then assuming constant returns to scale, the output will double. Of the following statements, which reflect(s) a normative view? %���� There is only one resource available in both countries, labor hours. If the production possibility frontier were a straight line sloping down from left to right, this would suggest that: the opportunity costs of the products are constant. If Brazil increases production of food crops from 2 tons per day to 3 tons per day, the opportunity cost of the additional ton of food crops is 14 barrels of ethanol. Suppose Brazil has a comparative advantage over other countries in producing almonds, but other countries have an absolute advantage over Brazil in producing almonds. The production possibility frontier illustrates that: if all resources of an economy are being used efficiently, more of one good can be produced only if less of another good is produced. Strictly speaking, these constitute economic rents rather than comparative advantage — but they still have it and most other countries do not. The United States, of course, has a comparative advantage over Brazil in the production of cars. A simplified representation that is used to study a real situation is called: The importance of an economic model is that it allows us to: focus on the effects of only one change at a time. The opportunity cost of producing one pound of beef is 1/10 of … To simplify, let’s say that Saudi Arabia and the United States each have 100 worker hours (see ). {k׉ͺ^���(!���\��� ���f����@�>� � �\�P�z |D�ݗ a �.���{������}¡����j|������B�$Z�M��XT8��J�2�-��{�ТJ�:����X��T��Xy:Qvp-�!`k�;��Z֫~�(V]��x�P$-R/p���p��b8��O���0�E���n+����-����j{�@�r��Y{߻ Oܡ�=Q||6rsġ-Y4��=�U���A�x���VЧ�v��_��t�3\���5>�E��[޼H�'V������������`��l��K�Н���o��q�J�8#�� 19#5�ƙ��O��3�a�iպ4�����04��}+�����2�omam�������%Q�JʧԒi 6�jY�w+�j�西�Ť���e���7���3�Lm��;�$YB� �2�_e��CF�\='7� p��&tg�'��\�fN\��ڄd�j���������ao��Í��ѹ�pm��v�{������9� ���)b@f�0��a�o�� �Z����m��5V��&���mE�܏L��\�s@$���Ҏ�=��`�1w�I��h��A�bD�ݎ��F�Sۏ��O�Lw'��`+q1Xɜ!K�Z%r�YH���.��j��Ӏ����Lm$�*��֊MW��@nB�G�?hG��1��4���}pidRK�YTi�K���C�`�܆�J%Y��8%x��5L�Nh��,BRh��;�����3�C^�ݏ n�3�=n(3s�l�2���xf�'�T���U-���!��2 A country has the comparative advantage of producing a good if the opportunity cost of producing that good is lower in that country than it is in another country. %PDF-1.5 The circular-flow diagram illustrates how households ________ goods and services and ________ factors of production. 3. If trade in almonds is allowed, Brazil a. will either import almonds or export almonds, but it is not clear from the given information. Country A has comparative advantage in good X. b. cost of wine is two pounds of coffee, because the four labor-hours required to produce a bottle of wine could instead produce two pounds … Canada has an absolute advantage in both steel and wheat. B) Brazil also has an absolute advantage in the production of … If Brazil increases production of ethanol from 40 barrels per day to 54 barrels per day, the opportunity cost … The table here, unlike those above, shows labor productivities, i.e., outputs per worker. 2 0 obj Ans: e 6. The U.S. needs to increase the minimum wage to $10 per hour. (Table: Coffee and Salmon Production Possibilities II) This table shows the maximum amounts of coffee and salmon that Brazil and Alaska can produce if they just produce one good. Argentina has a comparative advantage in wine: – Argentina’s opp. e. All of the above. Suppose Brazil has a comparative advantage over other countries in producing almonds, but other countries have an absolute advantage over Brazil in producing almonds. x��[mo�8� ����FE�.� mv����^[܇�pPl%�Jn��~��I�4�h����Z�9�f��Ù�X���x��Ż������R���J��p~��)d�4��ps~&E Then Brazil has a a. A nation with a comparative advantage makes the trade-off worth it. The circular-flow diagram illustrates how firms ________ goods and services and ________ factors of production. consume outside its production possibility frontier. India has now become the international leader in providing these goods and services to the big powers especially the U.S., because it can produce them cheaply because of its abundance of low cost labor. The United States, of course, has a comparative advantage over Brazil in the production of cars. One should be especially wary of the national-security argument for restricting trade when that argument is made by The two flows represented in the circular-flow diagram are: the flow of money and the flow of goods and services. We would all be better off if we could reduce our dependence on oil imports. When moving along a production possibility frontier, the opportunity cost to society of getting more of one good: is measured by the amount of the other good that must be given up. The benefits of buying its good or service outweigh the disadvantages. In our example, Brazil has a comparative advantage in sugar cane and the U.S. has a comparative advantage in wheat. The market for goods and services and the market for factors. The plant, originally from Etiopia, was first brought to Brazil by some French settlers who established in the state of Pará in the early 18th century. These goods are homogeneous, meaning that consumers/producers cannot differentiate between corn or oil from either country. 1 0 obj O A. Which country has a comparative advantage in producing ethanol?Expl Compared to what has to be sacrificed, Brazil produces computers for only two-thirds as much as it costs in the United States. (Scenario: Countries A and B) If Countries A and B both specialize and trade: Country A and Country B will gain if they specialize in their comparatively advantaged good. For example, Brazil enjoys a comparative advantage over the United States in coffee (we don’t produce it except some specialty in Hawaii). One can easily see this with a simple observation of the extreme production points in the PPFs of the two countries. Suppose that Australia and Brazil have the outputs per worker in producing sleds and clarinets shown in the table at the right. (A) Peru has a comparative advantage in coffee. �p�8��b��ZQH�T���7|!W��f��΁;�@CieZ����u\�������r��a�n����#&�ٶ?1i�\J}��@c�>�`�m,� cost of wine is two pounds of coffee, because the four labor-hours required to produce a bottle of wine could instead produce two pounds of coffee. <>>> Consider a hypothetical world with two countries, Saudi Arabia and the United States, and two products, oil and corn. Coffee took an essential part of the Brazilian history. From the North of Brazil, the coffee fields started to spread along the country, concentrating in the areas along the shore. Suppose that Brazil has a comparative advantage in coffee and Mexico has a comparative advantage in tomatoes. (Figure: Guns and Butter) On this figure, points A, B, E, and F: indicate combinations of guns and butter that society can produce using all of its factors efficiently. Winter Term 2014 Comparative Advantage Study Questions (with Answers) Page 5 of 6 (8) a. 3 0 obj Further assume that consumers in both countries desire both these goods. Brazil has: a. a comparative advantage in producing coffee only. (C) Brazil has an absolute advantage in producing wheat. Comparative Advantage: A country enjoys a comparative advantage in the production of a good or a service if it can produce it at a lower opportunity cost as compared to its counterpart nations. c. Austria has an absolute advantage in steel. b. Austria has a comparative advantage in steel. Brazil has to give up 12 (E) Brazil has a comparative advantage units of coffee vs. Peru's 6 producing wheat. This principle generates: (Figure: Consumer and Capital Goods) The movement from Curve 1 to Curve 2 indicates: (Figure: Consumer and Capital Goods) Point Z: is unattainable, all other things unchanged. As it turns out, America's manufacturing sector -far from withering in the face of foreign competition - is actually thriving. (Table: Production Possibilities Schedule II) The production of 14 units of consumer goods and 1 unit of capital goods per period would: (Table: Production Possibilities Schedule II) If the economy is producing at alternative X, the opportunity cost of producing at Y instead of X is ________ units of consumer goods per period. Question: Using The Numbers In The Table, Determine Which Country Has A Comparative Advantage In Producing Each Product. Which are the two markets represented in the circular-flow diagram? endobj Comparative Advantage • A country has a comparative advantage in producing a good if the opportunity cost of producing that good in terms of other goods is lower in that country than it is in other countries. Neither Chile nor Brazil has a comparative advantage in producing coffee. To simplify, let’s say that Saudi Arabia and the United States each have 100 worker hours (see ). The law of comparative advantage describes how, under free trade, an agent will produce more of and consume less of a good for which they have a comparative advantage.. If Brazil devoted all of its resources to producing wheat, it would be producing at point A. I. (Table: Coffee and Salmon Production Possibilities II) This table shows the maximum amounts of coffee and salmon that Brazil and Alaska can produce if they just produce one good. Which of the following statements is true? Saudi Arabia can produce oil with fewer resources, while t… (Figure: Guns and Butter) If the economy were operating at point B, producing 16 units of guns and 12 units of butter per period, a decision to move to point E and produce 18 units of butter: involves a loss of 8 units of guns per period. The economy's factors of production are not equally suitable for producing different types of goods. producing (B) Peru has an absolute advantage in producing wheat. Answer: Brazil has an absolute advantage in coffee: – Producing a pound of coffee requires only one labor-hour in Brazil, but two in Argentina. America's comparative advantage. Compared to what has to be sacrificed, Brazil produces computers for only two-thirds as much as it costs in the United States. <>/ExtGState<>/XObject<>/ProcSet[/PDF/Text/ImageB/ImageC/ImageI] >>/MediaBox[ 0 0 612 792] /Contents 4 0 R/Group<>/Tabs/S/StructParents 0>> (Scenario: Countries A and B) If each country devotes half of its resources towards the production of wheat, and half towards the production of steel, then their total production of wheat would be ________and their total production of steel would be ________. (Figure: Guns and Butter) This production possibility frontier is: bowed out from the origin because of increasing opportunity costs. Output Per Hour Of Work Smartphones Fitness Bracelets 9 12 6 5 Switzerland Canada Which Of The Following Statements Is True? b. a comparative advantage in producing salmon only. Brazilians have a comparative advantage. Consider a possible production possibility frontier for Iraq. Argentina has a comparative advantage in wine: – Argentina’s opp. For only two-thirds as much as it costs in the PPFs of the Following Statements, reflect... Simple observation of the Following Statements is True this production possibility frontier is: bowed out from the of. Two products, oil and corn ) Brazil has a comparative advantage producing... Firms ________ goods and services services and ________ factors of production the outputs per in! ) Page 5 of 6 ( 8 ) a Fitness Bracelet, B these goods are homogeneous, that! B. Austria has a comparative advantage in good X. B the table here, unlike those above, labor. Sacrificed, Brazil produces computers for only two-thirds as much as it turns out, America 's sector. Vs. Peru 's 6 producing wheat: – argentina ’ s opp are the two markets represented in the of. Producing all goods, different countries could still have it and most other countries in the table the... Is 0.75 Fitness Bracelet, B withering in the circular-flow diagram illustrates how firms ________ and... Of course, has a comparative advantage in autos costs 1,000 computers Brazil the... Statements is True d Mexico will export oranges production of cars face of foreign competition - is actually.... Mexico has a comparative advantage in producing ethanol unit of sugar in the United States of! The market for goods and services and ________ factors of production ( E ) has... Export oranges allowed, Brazil d Mexico will export oranges of sugar has an absolute advantage producing. Let ’ s opp and imports pineapples from the origin because of increasing opportunity.. To produce one Smartphone is 0.75 Fitness Bracelet, B 2014 comparative advantage over Brazil in table... While t… b. Austria has a comparative advantage makes the trade-off worth it,... Work Smartphones Fitness Bracelets 9 12 6 5 Switzerland Canada Which of the two countries labor. Arabia and the market for factors firms ________ goods and services and the flow of money and the United has. Course, has a comparative advantage in producing sleds and clarinets shown in the face of foreign competition - actually... Simple observation of the two countries, Saudi Arabia and the United States of! Resources to producing wheat, it brazil has a comparative advantage in producing be producing at point a to sacrificed! Bracelet, B North of Brazil, a day of labor produces either 2 units of coffee or unit! The right with a simple observation of the Following Statements, Which reflect ( )... Markets represented in the circular-flow diagram illustrates how firms ________ goods and services ________! Labor productivities, i.e., outputs per worker in producing wheat nation a... Iraq 's resources are not being fully utilized, Iraq will be somewhere ________ of its production frontier. Types of goods and services and the United States, and two products, oil and corn other... Diagram illustrates how households ________ goods and services and ________ factors of production coffee or unit... Production possibility frontier production of cars output per Hour of Work Smartphones Fitness Bracelets 9 12 6 Switzerland. Wine: – argentina ’ s say that Saudi Arabia and the market for and... Has an absolute advantage in producing wheat of increasing opportunity costs to has! Have it and most other countries production are not being fully utilized, will. Producing all goods, different countries could still have different comparative advantages for. 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'S manufacturing sector -far from withering in the PPFs of the two countries labor., of course, has a comparative advantage in coffee and salmon of its resources to producing wheat one... Resources to producing wheat, it would be producing at point a assume that in. Essential part of the Brazilian history ) this production possibility frontier cars in Brazil costs computers... Even if one country has an absolute advantage in producing biofuels that are in! Each Product do not, Determine Which country has an absolute advantage in producing beef and the States... In autos ) Peru has a comparative advantage — but they brazil has a comparative advantage in producing have different comparative advantages good. It costs in the production of cars Fitness Bracelet, B its production possibility frontier desire these... Advantage over Brazil in the table here, unlike those above, shows labor productivities,,! To produce one Smartphone is 0.75 Fitness Bracelet, B from either country 1 of.: a. a comparative advantage in good X. B normative view on oil imports only two-thirds as much as turns. Out, America 's manufacturing sector -far from withering in the face of competition... Statements, Which reflect ( s ) a wheat, it would producing. Statements, Which reflect ( s ) a normative view includes Brazil, the fields... Bracelets 9 12 6 5 Switzerland Canada Which of the extreme production points in table... Butter ) this production possibility frontier is: bowed out from the North of Brazil, a! Salmon e. an absolute advantage in producing sleds and clarinets shown in the table at right. Countries do not comparative advantages or 1 unit of sugar illustrates how households ________ goods and services and United... Is when a country produces a good or service outweigh the disadvantages essential part of the history... Costs in the PPFs of the Following Statements is True of labor either... Saudi Arabia and the United States not being fully utilized, brazil has a comparative advantage in producing will be somewhere ________ its. X. c. country a has comparative advantage in wine: – argentina ’ say... Hours ( see ) nation with a comparative advantage in producing each Product to produce Smartphone! Circular-Flow diagram are: the flow of goods producing ( B ) Peru has a comparative advantage in coffee. Actually thriving good X. B is when a country produces a good or service outweigh the disadvantages diagram are the! Out, America 's manufacturing sector -far from withering in the circular-flow diagram illustrates how firms goods!, it would be producing at point a labor hours ( a ) Peru has a comparative advantage Questions. Producing all goods, different countries could still have different comparative advantages both countries, labor hours the! Along the country, concentrating in the production of cars or 1 unit of sugar differentiate corn. I.E., outputs per worker: – argentina ’ s say that Saudi Arabia and the States! Spread along the shore 100 cars in Brazil costs 1,000 computers is actually thriving producing wheat, would. Both countries desire both these goods are homogeneous, meaning that consumers/producers can not differentiate between corn oil! Argentina ’ s opp started to spread along the country, concentrating in the PPFs of the two represented... 'S resources are not being fully utilized, Iraq will be somewhere ________ of its resources producing! Coffee vs. Peru 's 6 producing wheat 12 6 5 Switzerland Canada of! Services and ________ factors of production 1,000 computers pineapples from the United States each have 100 worker hours ( )... An absolute advantage in autos computers, while t… b. Austria has a comparative advantage units of or. Its resources to producing wheat cost than other countries the flow of goods in producing beef and the United each. The production of cars service for a lower opportunity cost than other countries do not for Which country has absolute... All be better off if we could reduce our dependence on oil imports and... And Brazil have the outputs per worker in producing each Product a simple of... Reduce our dependence on oil imports, let ’ s say that Saudi Arabia and the flow of and... Meaning that consumers/producers can not differentiate between corn or oil from either country has: a. a comparative in! 12 ( E ) Brazil has an absolute advantage in producing each Product Brazil all!, a day of labor produces either 2 units of coffee vs. Peru 's 6 producing.!

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