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24 August, 17:07

If Brazil gives up 3 automobiles for each ton of coffee it produces, while Peru gives up 7 automobiles for each ton of coffee it produces, then: A) Brazil has a comparative advantage in automobile production and should specialize in coffee. B) Brazil has a comparative advantage in coffee production and should specialize in the production of automobiles. C) Brazil has a comparative advantage in coffee production and should specialize in coffee production. D) Brazil has a comparative advantage in automobile production and should specialize in automobile production

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  1. 24 August, 19:25
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    The correct answer is option C.

    Explanation:

    The opportunity cost for producing a ton of coffee for Brazil is

    = 3 automobiles

    The opportunity cost for producing a ton of coffee for Peru is

    = 7 automobiles

    We see that Brazil has a lower opportunity cost in the production of coffee as compared to Peru.

    A country is considered to be having a comparative advantage in the production of a good if it can produce it at a lower opportunity cost.

    Here, we can say that Brazil has a comparative advantage in the production of coffee and should specialize in coffee production.
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Home » Business » If Brazil gives up 3 automobiles for each ton of coffee it produces, while Peru gives up 7 automobiles for each ton of coffee it produces, then: A) Brazil has a comparative advantage in automobile production and should specialize in coffee.
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