The following table shows the production of wheat and corn in Brazil and Mexico. Assume that both
Question:
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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.
Opportunity cost is the profit lost when one alternative is selected over another. The Opportunity Cost refers to the expected returns from the second best alternative use of resources that are foregone due to the scarcity of resources such as land,...
Step by Step Answer:
a Brazil has the absolute advantage in both goods because the same amount of resources 1 million acres of land can produce more of both goods than is ...View the full answer
Microeconomics
ISBN: 978-0321866349
14th canadian Edition
Authors: Christopher T.S. Ragan, Richard G Lipsey
