Micro Unit 1, Question 10- Comparative Advantage

The video tutorial explains the concept of comparative advantage using Brazil and Peru as examples. It details how to calculate per unit opportunity cost to determine which country has a comparative advantage in producing sugar and wheat. Brazil has a comparative advantage in sugar, while Peru has it in wheat. The video also clarifies that Peru does not have an absolute advantage in sugar production. It concludes by highlighting that both countries can benefit from trade if the terms are favorable.

What is the opportunity cost for Brazil to produce one unit of sugar?

• 3/2 units of wheat

• 2/3 unit of wheat

• 1/2 unit of wheat

• 1 unit of wheat

Which country has a comparative advantage in sugar production?

• Neither

• Both

• Peru

• Brazil

What is the opportunity cost for Peru to produce one unit of wheat?

• 1/2 unit of sugar

• 3/2 units of sugar

• 2/3 unit of sugar

• 1 unit of sugar

Which statement is true about absolute advantage in sugar production?

• Brazil has an absolute advantage

• Both have an absolute advantage

• Peru has an absolute advantage

• Neither has an absolute advantage

How can both Brazil and Peru benefit from trade?

• By producing only sugar

• By ensuring the terms of trade are beneficial

• By not trading at all

• By producing only wheat