Question

Brazil can produce $100$pounds of beef or $10$autos. In contrast, the United States can produce $40$pounds of beef or $30$autos. Which country has the absolute advantage in beef? Which country has the absolute advantage in producing autos? What is the opportunity cost of producing one pound of beef in Brazil? What is the opportunity cost of producing one pound of beef in the United States?

Short answer

Brazil has the absolute advantage in beef. The United States has the absolute advantage in producing autos. The opportunity cost of producing one pound of beef in Brazil is $\frac{1}{10}$. The opportunity cost of producing one pound of beef in the United States is$\frac{3}{4}$.

Step-by-step solution

Step 1. Meaning of Absolute Advantage.

Absolute advantage is when one country can use fewer resources to produce a good compared to another country.

Step 2. Meaning of Opportunity Cost.

The forgone benefit that would have been derived from an option not chosen is the opportunity cost.

Step 3. The absolute advantage in beef

Brazil has the absolute advantage in beef as it can produce $100$pounds of beef as compared to$40$pounds of beef.

Step 4. The absolute advantage in producing autos.

The United States has the absolute advantage in producing autos as it can produce$30$autos as compared to$10$autos.

Step 5. The opportunity cost of producing one pound of beef in Brazil.

The opportunity cost of producing one pound of beef in Brazil is sacrificing the production of $\frac{1}{10}$of autos.

$$\begin{gathered} 100beefs=10autos \\ 1beef=\frac{10}{100} \\ =\frac{1}{10}autos \end{gathered}$$

Step 6. The opportunity cost of producing one pound of beef in the United States.

The opportunity cost of producing one pound of beef in the United States is sacrificing the production of $\frac{3}{4}$of autos.

$$\begin{gathered} 40beefs=30autos \\ 1beef=\frac{30}{40} \\ =\frac{3}{4}autos \end{gathered}$$