Scenario 20.1 Suppose labor productivity differences are the only determinants o
ID: 1206467 • Letter: S
Question
Scenario 20.1 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.
Refer to Scenario 20.1. Which of the following statements is true?
a. Brazil has a comparative advantage in producing coffee.
b. Neither Chile nor Brazil has a comparative advantage in producing coffee.
c. Chile has a comparative advantage in producing both coffee and sugar.
d. Brazil has a comparative advantage in producing both coffee and sugar.
e. Brazil has a comparative advantage in producing sugar.
Explanation / Answer
C is Correct