Suppose that the U.S. and Brazil produce only two goods --- computer and coffee. The table below gives its production possibilities.
Computer Opp Cost Coffee Opp Cost
U.S.: 12 4
Brazil: 5 10
1. Draw the graphs of the production frontier for each country. Make sure that you level the diagram properly and indicate the name of the country under the graph.
2. What are the opportunity costs of producing each good in the two countries? List them in the table.
3. On which good each country has a comparative advantage?
4. Which country exports computers? Coffee?
5. What is the range of TOT in which only Brazil gains from trade?
6. What is the range of TOT in which only the U.S. gains from trade?
7. What is the range of TOT in which both countries gain from trade?
Suppose that the U.S. and Brazil produce only two goods --- computer and coffee. The table below gives its production possibilities.
Computer Opp Cost Coffee Opp Cost
U.S.: 12 4
Brazil: 5 10
1. Draw the graphs of the production frontier for each country. Make sure that you level the diagram properly and indicate the name of the country under the graph.
2. What are the opportunity costs of producing each good in the two countries? List them in the table.
3. On which good each country has a comparative advantage?
4. Which country exports computers? Coffee?
5. What is the range of TOT in which only Brazil gains from trade?
6. What is the range of TOT in which only the U.S. gains from trade?
7. What is the range of TOT in which both countries gain from trade?
Related textbook solutions
Related questions
QUESTION 7
Suppose there are only two countries in the world, Country A and Country B. The following table contains information on each country's demand and supply of some good.
| Country A | Country B | |
| Demand | Q = 107 - 2P | Q = 167 - 1P |
| Supply | Q = 1P - 28 | Q = 3P - 17 |
If there is free trade between these two countries, what would be the quantity of Net Exports in Country A?
Round your answer to two decimal places. Remember, Net Exports is Exports - Imports. If your answer is negative, be sure to include the negative sign.
QUESTION 8
Suppose there are only two countries in the world, Country A and Country B. The following table contains information on each country's demand and supply of some good.
| Country A | Country B | |
| Demand | Q = 187 - 1P | Q = 137 - 3P |
| Supply | Q = 3P - 14 | Q = 3P - 26 |
If there is free trade between these two countries, and this is the only good in which these two nations trade, what would be the value of Country B's Trade Balance?
