Question

Suppose that the world price of sugar is 20cents a​ pound, Brazil does not trade​ internationally, and the equilibrium price of sugar in Brazil is 10cents a pound. Suppose that Brazil now begins to trade internationally. The price of sugar in Brazil​ ______. The quantity of sugar produced in Brazil​ ______.

Answer 1

Will increase, will increase.

Step-by-step explanation:

Answer 2

Will increase, will increase.

Step-by-step explanation:

Because Brazil has a lower price for sugar than the rest of the world , Brazil has a comparative advantage in producing sugar. In other words, it costs brazilians producers less than the world price of 20 cents to produce sugar.

Therefore, once Brazil begins trading in the world market, the price of sugar in Brazil will increase to 20 cents a pound and Brazilian growers will produce more sugar.