Suppose that Brazil and Peru exchange coffee and leather. Brazil can produce both coffee and leather more efficiently than Peru, but Brazil can produce coffee more efficiently than leather. Comparative advantage states that:
A) Brazil should produce both coffee and leather and not trade.
B) Brazil should produce coffee, Peru should produce leather, and both countries should trade.
C) Brazil should produce leather, Peru should produce coffee, and both countries should trade.
D) Peru should produce both coffee and leather and not trade.
Ans: B) Brazil should produce coffee, Peru should produce leather, and both countries should trade.
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