Question

Brazil can produce 100 pounds of beef or 10 cars; in contrast, the United States can...

Brazil can produce 100 pounds of beef or 10 cars; in contrast, the United States can produce 40 pounds of beef or 30 cars.

1- Draw the production possibility frontier for each country with beef on the horizontal axis.

2- What is the opportunity cost of one unit of beef in Brazil?

3- What is the opportunity cost of one car in Brazil?

4- What is the opportunity cost of one unit of beef in the US?

5- What is the opportunity cost of one car in the US?

6- Which country has a comparative advantage in beef?

7- Which country has s comparative advantage the in cars?

8- If each country specializes in the good in which it has a comparative advantage, how much of which good the US and Brazil produce?

9- (continued from part h) If they trade according to the terms of trade of 5 pounds of beef for one car, which combination of beef and car can Brazil and the US obtain? Show them on the PPF in part a. (Hint: They should be outside of the PPFs)

     

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Answer #1

2- What is the opportunity cost of one unit of beef in Brazil?

Solution: 1/10

Working: 10/100 = 1/10

3- What is the opportunity cost of one car in Brazil?

Solution: 10

Working: 100/10 = 10

4- What is the opportunity cost of one unit of beef in the US?

Solution: 3/4

Working: 30/40 = 3/4

5- What is the opportunity cost of one car in the US?

Solution: 4/3

Working: 40/30 = 4/3

6- Which country has a comparative advantage in beef?

Solution: Brazil

Working: Lower opportunity cost

7- Which country has s comparative advantage the in cars?

Solution: U.S.

Working: Lower opportunity cost

8- If each country specializes in the good in which it has a comparative advantage, how much of which good the US and Brazil produce?

Solution: Brazil

Working: Brazil has lower opportunity cost of one unit of beef

I have answered more than first 4 parts

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