Use the following data to work Problems Brazil produces ethanol from sugar at a cost of 83 cents per gallon. The United States produces ethanol from corn at a cost of $1.14 per gallon. Sugar grown on one acre of land produces twice the quantity of ethanol as the corn grown on an acre. The United States imports 5 percent of the ethanol it uses and produces the rest itself. Since 2003, U.S. ethanol production has more than doubled and U.S. corn production has increased by 45 percent.
a. Does Brazil or the United States have a comparative advantage in producing ethanol?
b. Sketch the PPF for ethanol and other goods and services for the United States.
c. Sketch the PPF for ethanol and other goods and services for Brazil.
a. Does Brazil or the United States have a comparative advantage in producing ethanol?
b. Sketch the PPF for ethanol and other goods and services for the United States.
c. Sketch the PPF for ethanol and other goods and services for Brazil.
a. Do you expect the opportunity cost of producing ethanol in the United States to have increased since 2003? Explain why.
b. Do you think the United States has achieved production efficiency in its manufacture of ethanol? Explain why or why not.
c. Do you think the United States has achieved allocate efficiency in its manufacture of ethanol? Explain why or why not.
d. Sketch a figure similar to Fig. 2.6 on p. 40 to show how both the United States and Brazil can gain from specialization and trade.