00:01
Let's go over this question.
00:31
Priority trade brazil is producing 5 units of beef and 1 unit of coffee.
00:37
That means that it's using its resources inefficiently or is not using all of its resources.
00:56
Because using all of its resources, it can produce 20 beef or 2 coffee.
01:18
We need to explain using the possibilities curve.
01:23
We're assuming constant opportunity costs.
01:25
The maximum amount of beef is 20.
01:31
The maximum amount of coffee is 2.
01:35
We draw a straight line connecting the two.
01:37
That gives us the production possibilities curve.
01:46
We're producing 5 units of beef and 1 unit of coffee.
02:00
This is going to be inside the production possibilities curve.
02:06
That means that there's incomplete or inefficient use of resources.
02:10
Now we want to know which one has comparative advantage.
02:17
We need to find the opportunity cost.
02:23
To get the opportunity cost to produce 1 beef, we would take the total amount that the country can produce using all of its resources and coffee and divide by the total amount of beef.
02:41
The opportunity cost to get 1 beef is 1 over 10 coffee or 0 .1 coffee.
03:11
For the other country, we would do the same calculation.
03:35
You can see that brazil can produce beef at the lower opportunity cost.
03:40
It has comparative advantage in beef.
03:52
Each country specializes in production of good in which it has comparative advantage...