If Brazil Has a Comparative Advantage in the Production of Coffee

question 198

Multiple Choice

If Brazil has a comparative advantage in the production of coffee compared to the United States, then

• A) Brazil also has an absolute advantage in the production of coffee.
• B) the United States has an absolute advantage in the production of coffee.
• C) Brazil can produce coffee at a lower opportunity cost than the United States.
• D) the United States cannot produce coffee.

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Definitions:

Marginal Product

The additional output that results from using one more unit of input, holding all other inputs constant in the production process.

Purely Competitive Market

A market structure characterized by many buyers and sellers, homogenous products, and free entry and exit, leading to price determination by supply and demand forces.

Least Costly Combination

Refers to an economic principle where firms choose a mix of inputs (labor, capital, etc.) that minimizes their costs while producing a given level of output.

Wage Rates

The standard amount of compensation paid to employees for their labor per unit of time or piece of work completed.