Labor productivity coefficients for the US and Brazil are given by the following table:CountryWheat per weekClothing per weekLabor(number of workers)United States28100Brazil12120Solve for:Who has the absolute advantage in wheat?What is the opportunity cost of 1 unit of wheat in the US? in Brazil?What is the opportunity cost of 1 unit of clothing in the US? in Brazil?Who has the comparative advantage in Wheat? In Clothing?Draw the production possibility frontier for the US. (Put Wheat on the Y-axis and Clothing on the X-axis)For Brazil (Put Wheat on the Y-axis and Clothing on the X-axis)Suppose each country decides to split its labor force equally on the production of each good. Locate the point on the PPF curve for each country that represents this allocation of labor.What’s their production and consumption combination # at this point?

Answered: Labor productivity coefficients for the…

Economics:

10th Edition

ISBN:9781285859460

Author:BOYES, William

Publisher:BOYES, William

Chapter34: World Trade Equilibrium

Section: Chapter Questions

Problem 9E

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Labor productivity coefficients for the US and Brazil are given by the following table:

Country	Wheat per week	Clothing per week	Labor(number of workers)
United States	2	8	100
Brazil	1	2	120

Solve for:

Who has the absolute advantage in wheat?
What is the opportunity cost of 1 unit of wheat in the US? in Brazil?
What is the opportunity cost of 1 unit of clothing in the US? in Brazil?
Who has the comparative advantage in Wheat? In Clothing?
Draw the production possibility frontier for the US. (Put Wheat on the Y-axis and Clothing on the X-axis)
For Brazil (Put Wheat on the Y-axis and Clothing on the X-axis)
Suppose each country decides to split its labor force equally on the production of each good. Locate the point on the PPF curve for each country that represents this allocation of labor.
What’s their production and consumption combination # at this point?

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A country is said to have an absolute advantage when it is able to produce a higher quantity of a good than the other country at the same cost or is able to produce same quantity at a lower cost. A country is said to have a comparative advantage in the production of a good when it can produce that good at a lower opportunity cost than the other countries.

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