Suppose that the U.S. and Brazil produce only two goods

Suppose that the U.S. and Brazil produce only two goods --- computer and coffee. The table below gives their production possibilities. U.S. Brazil Coffee Opp Cost Computer Opp Cost 12 5 4 10 1. Draw the graphs of production frontier for each country. Make sure that you level the diagram properly and indicate the name of the country under the graph. 2. What are the opportunity costs of producing each good in the two countries? List them in the table. 3. On which good each country has a comparative advantage?

Transcript

00:03 Hello, let us show the problem.

00:05 In this problem, a table is given.

00:07 You need to find what is the pattern of trend and what is the maximum free trade price of tea in terms of juice for free trade to be profitable.

00:17 Now the labor supply in india is 60 workers and to produce one unit of juice, they are needing three workers.

00:28 India needs three workers.

00:29 Therefore, 60 workers can produce 60 divided by 3, which means that 20 units of juice.

00:37 Therefore, to produce 1 unit of t, and here to produce 1 unit of t, 2 workers are required.

00:45 Therefore, 60 workers can produce 60 divided by 2, which means 30 units of t.

00:51 Therefore, the opportunity cost of 20 units of juice is equal to the opportunity cost of 30 units of t.

00:58 Or we can say the opportunity cost of one unit of juice is 30 divided by 20 which is 1 .5 units of t also we can say that the opportunity cost of 30 units of t is 20 units of juice therefore the opportunity cost of one unit of t is going to be 20 divided by 30 which means that 0 .67 units of juice this is for india now we can move to china the labor supply in china is 350 workers and to produce one unit of juice they need seven workers therefore 350 workers can produce 350 divided by seven which means 50 units of juice and to produce one in need of tea here they need five workers therefore 350 workers can produce 350 divided by five which means 70 units of tea therefore, the opportunity cost of 50 units of juice is 70 units of tea.

02:06 Or we can say the opportunity cost of 1 unit of juice is 70 divided by 50, which gives us 1 .4 units of t.

02:16 Also, the opportunity cost of 70 units of t is 50 units of juice...

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