Running head: PRODUCTION POSSIBILITY
The production possibility frontiers for Brazil and the USA
According to the concepts of absolute along with the comparative advantages the United
States of America have to specialize in the production of soda (1 can of soda costs here
32,5/125=0.26 units of clothing, and in Brazil, it costs 50/25=2 units of clothing). Brazil should
specialize in the production of clothing (one unit of clothing costs here 25/50=0.5 can consist of
soda, and in the United States of America it costs 125/32, 5=3.85 cans of soda).
From the above figure shown, without trade production of point of Brazil and the US has
been presented as point A and B respectively.
Therefore, for Brazil, the rate of Marginal transformation = 100,000/50,000 = 2 units of cloth.
Thus, In Brazil, 2 units production of clothing
require to be given up to produce the additional unit of the soda can. In the same way, for the
United States, the rate of Marginal transformation is equal to= 65,000/250,000 = 0.26 units of
In the USA, 0.26 unit are only units of clothing that are produced and at the same time
are required to be given up to produce the extra soda can. The labor-intensive good in other
hand is where an industry that requires greater labor volume costs in the production as d...