Final answer:
The opportunity cost is what is given up to produce something else. The U.S. and Mexico each have different opportunity costs for producing cars vs. beef, and based on these costs, the U.S. should specialize in autos while Mexico, like Brazil, should specialize in beef.
Step-by-step explanation:
The determination of opportunity cost in production helps a country decide which goods to produce, based on their ability to do so more efficiently than others. The opportunity cost is what must be given up to get something else. In this scenario, the U.S. can make either 100 cars or 300 pounds of beef whereas Mexico can produce 50 cars or 100 pounds of beef.
Absolute advantage refers to the ability of a country to produce a good more efficiently than other countries. The opportunity cost of producing one pound of beef is how much of the other goods (cars) the country must give up. For the U.S., the opportunity cost of one pound of beef is 1/3 of a car (since 100 cars could instead produce 300 pounds of beef), and for Mexico, it is 1/2 of a car (since 50 cars could instead produce 100 pounds of beef).
If we consider the scenario given in one of the reference points about Brazil and the US, Brazil has the absolute advantage in beef production, being able to produce 100 pounds of beef or 10 autos, while the U.S. can produce 40 pounds of beef or 30 autos. This indicates that 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. Based on these figures, Brazil should produce beef and the United States should specialize in producing autos.