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 production, as it can produce 100 pounds of beef compared to the United States' 40 pounds. The United States has the absolute advantage in auto production, as it can produce 30 autos compared to Brazil's 10 autos. The opportunity cost of producing one pound of beef in Brazil is \(\frac{1}{10}\) auto, while the opportunity cost of producing one pound of beef in the United States is \(\frac{3}{4}\) auto.

Step-by-step solution

Understanding Absolute Advantage and Opportunity Cost

An absolute advantage in production exists if a country can produce more of a good than another country can, given the same resources. The opportunity cost of producing a good is the quantity of a good the country has to give up to produce one unit of another good.

Brazil's Production Possibilities

Brazil can produce 100 pounds of beef or 10 autos.

United States Production Possibilities

The United States can produce 40 pounds of beef or 30 autos.

Comparing Production Possibilities

To find the country with an absolute advantage in producing beef, compare the maximum pounds of beef that can be produced by each country: Brazil: 100 pounds of beef United States: 40 pounds of beef Since Brazil can produce more pounds of beef (100) than the United States (40), Brazil has the absolute advantage in producing beef.

Finding the Absolute Advantage in Producing Autos

To find the country with an absolute advantage in producing autos, compare the maximum number of autos that can be produced by each country: Brazil: 10 autos United States: 30 autos Since the United States can produce more autos (30) than Brazil (10), the United States has the absolute advantage in producing autos.

Opportunity cost of producing one pound of beef in Brazil

If Brazil chooses to use all its resources to produce 100 pounds of beef, it can make 10 autos. The opportunity cost of producing one pound of beef in Brazil is the number of autos given up / pounds of beef produced: \(\frac{10 \ autos}{100 \ pounds \ of \ beef} = \frac{1 \ auto}{10 \ pounds \ of \ beef}\). Therefore, the opportunity cost of producing one pound of beef in Brazil is \(\frac{1}{10}\) auto.

Opportunity cost of producing one pound of beef in the United States

If the United States chooses to use all its resources to produce 40 pounds of beef, it can make 30 autos. The opportunity cost of producing one pound of beef in the United States is the number of autos given up / pounds of beef produced: \(\frac{30 \ autos}{40 \ pounds \ of \ beef} = \frac{3 \ autos}{4 \ pounds \ of \ beef}\). Therefore, the opportunity cost of producing one pound of beef in the United States is \(\frac{3}{4}\) auto.