Question

Argentina can produce 1 ton of meat (beef) using 0.1 years of labor. It can also produce 1

automobile using 2 years of labor. In order to produce 1 ton of beef, the United States uses 0.2 years of labor. It can produce an automobile using 1.5 years of labor. Argentina has
a. an absolute advantage in the production ofautomobiles.
d. a comparative advantage in the productionof beef.
b. an absolute advantage in the production of beef.
e. None of the above
c. a comparative advantage in the production of automobiles.

Answer 1

Brazil has the absolute advantage in beef production, and the United States has the absolute advantage in auto production. The opportunity cost of producing beef in Brazil is 1/10 of an auto, while in the United States it is 3/4 of an auto.

Step-by-step explanation:

In this case, Brazil has the absolute advantage in producing beef because it can produce 100 pounds of beef compared to the United States' 40 pounds. On the other hand, the United States has the absolute advantage in producing autos because it can produce 30 autos compared to Brazil's 10 autos.

The opportunity cost of producing one pound of beef in Brazil is 1/10 of an auto, while in the United States it is 3/4 of an auto. This means that Brazil gives up the production of 1/10 of an auto in order to produce one pound of beef, while the United States gives up the production of 3/4 of an auto for the same amount of beef.