Brazil and Canada trade two goods: bananas and ice pops. Brazil has a comparative advantage in banana production. This means that:

Question

Quizplus · Accepted Answer

Comparative advantage means that a country can produce a good at a lower opportunity cost than another country. If Brazil has a comparative advantage in banana production, it means that Brazil can produce bananas at a lower opportunity cost than Canada. However, it does not necessarily mean that Brazil will also have a comparative advantage in ice pop production. Canada may have a lower opportunity cost in producing ice pops than Brazil, making Canada the country with the comparative advantage in ice pop production. Therefore, the answer is B, which means that Canada has a comparative advantage in ice pop production.

Brazil and Canada Trade Two Goods: Bananas and Ice Pops