Macroeconomics 11th Edition by Michael Parkin

Exercise 29

Use the following data to work Problem. Brazil produces ethanol from sugar at a cost of 83 cents per gallon. The United States produces ethanol from corn at a cost of $1.14 per gallon. Sugar grown on one acre of land produces twice the quantity of ethanol as the corn grown on an acre. The United States imports 5 percent of the ethanol it uses and produces the rest itself. Since 2003, U.S. ethanol production has more than doubled and U.S. corn production has increased by 45 percent.
a. Do you expect the opportunity cost of producing ethanol in the United States to have increased since 2003Explain why.
b. Do you think the United States has achieved production efficiency in its manufacture of ethanolExplain why or why not.
c. Do you think the United States has achieved allocative efficiency in its manufacture of ethanolExplain why or why not.