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 an absolute advantage in producing only coffee.
b. Brazil has an absolute advantage in producing only sugar.
c. Chile has an absolute advantage in the production of both coffee and sugar.
d. Chile has an absolute advantage in producing only coffee.
e. Brazil has an absolute advantage in the production of both coffee and sugar.
c
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Gary and Diane must prepare a presentation for their marketing class. As part of their presentation, they must do a series of calculations and prepare 50 PowerPoint slides. It would take Gary 10 hours to do the required calculation and 10 hours to prepare the slides. It would take Diane 12 hours to do the calculations and 20 hours to prepare the slides
a. How much time would it take the two to complete the project if they divide the calculations equally and the slides equally? b. How much time would it take the two to complete the project if they use comparative advantage and specialize in calculating or preparing slides? c. If Diane and Gary have the same opportunity cost of $5 per hour, is there a better solution than for each to specialize in calculating or preparing slides?
For any pair of nations and goods, if each country has a comparative advantage in the production of one product, it is reasonable to expect that specialization and trade will benefit both countries.
Answer the following statement true (T) or false (F)