Brazil Can Produce One Unit of Sugar Cane for One

question 30

Multiple Choice

Brazil can produce one unit of sugar cane for one unit of labor and one iPod for eight units of labor, and China can produce one unit of sugar cane for two units of labor and one iPod for four units of labor. Which of the following is true?

• A) Before trade, China's opportunity cost of one unit of sugar cane is two iPods.
• B) China has an absolute advantage in sugar cane production.
• C) Both parties benefit if they specialize and trade at terms of one unit of sugar cane for two iPods.
• D) With trade, Brazil should specialize in sugar cane and China in iPods.

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Definitions:

Total Utility

The total satisfaction or benefit derived from consuming a particular quantity of goods or services.

Total Utility

The total satisfaction or benefit that a consumer derives from consuming a certain quantity of a good or service.

Equilibrium Combination

A state in which market supply and demand balance each other, resulting in stable prices and quantities.

Marginal Utility

The change in overall satisfaction derived from the consumption of an additional unit of a good.