Scenario 20.1 Suppose labor productivity differences are the only determinants of comparative advantage,and Brazil and Chile both produce only coffee and sugar.In Chile,either 5 units of coffee or 2 units of sugar can be produced in one day.In Brazil,a day of labor produces either 2 units of coffee or 1 unit of sugar.
-Refer to Scenario 20.1.Calculate the opportunity cost of producing sugar in Brazil.

Question

Quizplus · Accepted Answer

The opportunity cost of producing sugar in Brazil can be calculated by comparing the amount of sugar that could be produced with the same amount of labor used for producing coffee. In Brazil, a day of labor can produce either 2 units of coffee or 1 unit of sugar. Therefore, the opportunity cost of producing 1 unit of sugar is 2 units of coffee. This means that if Brazil produces 1 unit of sugar, it has to forgo the production of 2 units of coffee. Hence, the opportunity cost of producing sugar in Brazil is 2 pounds of coffee (since the question does not specify the units of measurement, we can assume it to be pounds).