The following table shows the production of wheat and corn in Brazil and Mexico. Assume that both

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The following table shows the production of wheat and corn in Brazil and Mexico. Assume that both countries have one million acres of arable land.

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a. Which country has the absolute advantage in wheat? In corn? Explain.
b. What is the opportunity cost of producing an extra bushel of wheat in Brazil? In Mexico? Which country has the comparative advantage in wheat production? Explain.
c. Which country has the comparative advantage in corn production? Explain.
d. Explain why one country can have an absolute advantage in both goods but cannot have a comparative advantage in both goods.
e. On a scale diagram with wheat on the horizontal axis and corn on the vertical axis, draw each country's production possibilities boundary.
f. What is shown by the slope of each country's production possibilities boundary? Be as precise as possible.
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Microeconomics

ISBN: 978-0321866349

14th canadian Edition

Authors: Christopher T.S. Ragan, Richard G Lipsey

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