Question

Brazil can produce one unit of sugar cane for one unit of labor and one iPod for eight units of labor, and China can produce one unit of sugar cane for two units of labor and one iPod for four units of labor. Which of the following is true? Before trade, China's opportunity cost of one unit of sugar cane is two iPods. China has an absolute advantage in sugar cane production. Both parties benefit if they specialize and trade at terms of one unit of sugar cane for two iPods. With trade, Brazil should specialize in sugar cane and China in iPods.

Answer 1

The statement that is true is with trade Brazil should specialize in sugarcane and China in i-pod

Explanation:

When the trade conditions are examined Brazil must specialize in sugarcane and China must specialize in the trade of i-pods because each country has their trained set of labors in each production

Hence they must make more effort to make their country specialized in the following commodities in which they are more trained and this will promote the economy of their country