Scenario 20.1 Suppose Labor Productivity Differences Are the Only Determinants of Comparative

question 74

Multiple Choice

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)Brazil has a comparative advantage in producing both coffee and sugar.
• C)Chile has a comparative advantage in producing both coffee and sugar.
• D)Neither Chile nor Brazil has a comparative advantage in producing coffee.
• E)Brazil has a comparative advantage in producing sugar.

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Corrective Tax

A levy intended to motivate individuals to consider the communal costs resulting from adverse external effects.

Tradable Pollution Permits

A market-based approach to controlling pollution by providing economic incentives for achieving reductions in the emissions of pollutants.

Pollution

The introduction of contaminants into the natural environment that cause adverse change, often as a byproduct of human activities.

Well-Maintained Yard

A property space that is kept in good condition through regular care, such as mowing, watering, and landscaping.