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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Definitions:

Retailing

The set of business activities that add value to products and services sold to consumers for their personal or family use; includes products bought at stores, through catalogs, and over the Internet, as well as services like fast-food restaurants, airlines, and hotels.

Daisy Brand

A company known for its dairy products, especially sour cream and cottage cheese, emphasizing quality and natural ingredients.

Dollar General

An American chain of variety stores headquartered in Tennessee, known for selling low-priced products.

Merchandise

Products available for sale, particularly in the context of retail.