The Story of Foreign Trade and Exchange

Published: 2020-07-06 08:21:06
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Category: History

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For example, because of differences in soil and climate, the United States is better at producing wheat than Brazil, and Brazil is better at producing coffee than the United States. Obviously both countries are better off when Americans produce wheat and exchange a portion of it for some of the coffee that Brazilians produce. But does this mean that a country with an absolute advantage in the production of a good should always produce that good rather than import it? No, as the English economist David Ricardo first explained in the early 1800s.
A country can have an absolute advantage in the production of a good without having a comparative advantage. Comparative advantage is what determines whether it pays to produce a good or import it. I assumed that there are only two goods, cars and computers, and one productive resource which is some composite of land, labor, and capital. My assume also that producing 100 cars requires two units of the productive resource (PR) in the, United States and four units in Brazil, and producing 1,000 computers requires three units of PR in the United States and four in Brazil.
Also my choosing company Pilao is one of the most famous coffee company in Brazil. The brand has been initially in the possession of Cafe Pilao Caboclo Ltda – the major Brazilian coffee company of that time. After a while the enterprise has been sold to the Sara Lee Corporation – a worldwide consumer-goods company located in Downers Grove, Illinois, USA. The land of exotic flora and fauna, inflammatory dances and hot temper is populated with one of the most desperate coffee drinkers in the world.
The world coffee history states that coffee has been brought to the Southern America from the Far East and only after some contrivances it has spread throughout its territory. However nowadays the Latin world gained the reputation of one of the largest coffee exporters and releases both ground and specialty coffe Opportunity cost is the key to comparative advantage: Individuals and nations gain by producing goods at relatively low costs and exchanging their outputs for different goods produced by others at relatively low cost. All potential trading partners can gain enormously through appropriate specialization and exchange.

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