Brazil can produce one unit of sugar cane for one unit of labor and one iPod for eight units of labor, and China can produce one unit of sugar cane for two units of labor and one iPod for four units of labor. Which of the following is true?
A) Before trade, China's opportunity cost of one unit of sugar cane is two iPods.
B) China has an absolute advantage in sugar cane production.
C) Both parties benefit if they specialize and trade at terms of one unit of sugar cane for two iPods.
D) With trade, Brazil should specialize in sugar cane and China in iPods.

Question

Quizplus · Accepted Answer

Brazil has a comparative advantage in sugar cane production (1 labor unit vs. China's 2), and China has a comparative advantage in iPod production (4 labor units vs. Brazil's 8). Thus, Brazil should specialize in sugar cane and China in iPods for mutual benefit.

Brazil Can Produce One Unit of Sugar Cane for One