Answer to Question #135821 in Economics of Enterprise for Zulfiqar

Question

. An average worker in Brazil can produce an ounce of soybeans in 20 minutes and an ounce of coffee in 60 minutes, while an average worker in Peru can produce an ounce of soybeans in 50 minutes and an ounce of coffee in 75 minutes.
a. Who has the absolute advantage in coffee? Who has the absolute advantage in Soybeans. Explain.
b. Who has the comparative advantage in coffee? In Soybeans? Explain.
c. If the two countries specialize and trade with each other, who will import coffee? Explain.
d. Assume that the two countries trade and that the country importing coffee trades 2 ounces of soybeans for 1 ounce of coffee. Explain why both countries will benefit from this trade.

Answer 1

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