Scenario 34.1 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 34.1.Calculate the opportunity cost of producing sugar in Brazil.

Question

Quizplus · Accepted Answer

The opportunity cost of producing sugar in Brazil is the amount of coffee that could have been produced with the same amount of resources. One day of labor in Brazil can produce either 2 units of coffee or 1 unit of sugar. Therefore, producing one unit of sugar in Brazil would cost 2 units of coffee (the amount of coffee that could have been produced with the same resources). This means that the opportunity cost of producing sugar in Brazil is 2 pounds of coffee. Therefore, the answer is D) 2 pounds of coffee.