Question

Brazil has excellent resources and expertise to farm and produce coffee beans, whereas the United States is ill-suited for the production of coffee. Brazil should:

A. continue to produce coffee and trade it for U.S. products Brazil needs and cannot produce.
B. abandon coffee and produce a product Brazil's residents strongly demand.
C. stop trading coffee with the U.S. and only trade coffee with its neighboring countries.
D. increase coffee advertising to create a greater demand for coffee in Brazil.
E. slow production of coffee and allocate Brazilian resources elsewhere.

Answer 1

Brazil should continue to produce coffee and engage in international trade with the U.S., leveraging its comparative advantage in coffee production for mutual economic benefit.

Step-by-step explanation:

Brazil has favorable resources and expertise in coffee production, making it a leading exporter in this industry. Given their comparative advantage in coffee, and the mutual benefits derived from international trade, Brazil should continue to produce coffee and trade it with countries like the United States, which has a comparative advantage in products such as grains. This trade is beneficial as it allows each country to specialize in the production of goods for which they have a lower opportunity cost.

The concept of specialization and trade based on comparative advantage suggests that Brazil would benefit economically by continuing to focus on the production of coffee and potentially other agricultural products such as sugar and soybeans, for which it also has favorable production conditions. Furthermore, by engaging in trade with the U.S. and other countries, Brazil can import goods that are not as efficiently produced within its own borders, thus improving the overall economic efficiency and wealth of both trading nations.