Suppose that Brazil has a comparative advantage in coffee and Mexico has a comparative advantage in tomatoes.Which of the following groups would be worse off if these countries specialize and trade?
A)Mexican coffee producers.
B)Brazilian coffee producers.
C)Mexican tomato producers.
D)All groups are better off when specialization and trade take place.

Question

Quizplus · Accepted Answer

Mexican coffee producers would be worse off if Mexico specializes in tomatoes and trades with Brazil for coffee, as Mexico would likely reduce its coffee production in favor of tomatoes, in which it has a comparative advantage. This would negatively impact Mexican coffee producers due to decreased domestic production and increased competition from imported Brazilian coffee.

Suppose That Brazil Has a Comparative Advantage in Coffee and Mexico