$$\begin{array} { | l | c | c | }
\hline & \text { Wine } & \text { Machines } \
\hline \text { Brazil } & 30 & 10 \
\hline \text { Poland } & 10 & 10 \
\hline
\end{array}$$ The accompanying table gives maximum-output alternatives for Brazil and Poland. It can be seen that if the two nations open up trade with each other, then

Question

$$\begin{array} { | l | c | c | } 
\hline & \text { Wine } & \text { Machines } \
\hline \text { Brazil } & 30 & 10 \
\hline \text { Poland } & 10 & 10 \
\hline
\end{array}$$ The accompanying table gives maximum-output alternatives for Brazil and Poland. It can be seen that if the two nations open up trade with each other, then

Quizplus · Accepted Answer

According to the principle of comparative advantage, each country should specialize in producing the good in which it has a lower opportunity cost and trade with the other country. In this case, Brazil has a lower opportunity cost of producing wine (1 machine foregone for 3 wines produced) compared to Poland (1 machine foregone for 1 wine produced), while Poland has a lower opportunity cost of producing machines (1 wine foregone for 1 machine produced) compared to Brazil (1 wine foregone for 1/3 machine produced). Therefore, Brazil should specialize in producing wine and import machines from Poland, while Poland should specialize in producing machines and import wine from Brazil. This would allow both countries to consume more of both goods than they would be able to produce on their own, leading to gains from trade.

The Accompanying Table Gives Maximum-Output Alternatives for Brazil and Poland