that the opportunity cost of wheat in terms of sugar cane is lower in the U.S. than in Brazil. Conversely, the

opportunity cost of sugar cane is lower in Brazil. The U.S. has comparative advantage in wheat and Brazil has

comparative advantage in sugar cane.

When a country can produce a good at a lower opportunity cost than another country, we say that this country

has a comparative advantage in that good. Comparative advantage is not the same as absolute advantage,

which is when a country can produce more of a good. In our example, Brazil has an absolute advantage in

sugar cane and the U.S. has an absolute advantage in wheat. One can easily see this with a simple observation

of the extreme production points in the PPFs of the two countries. If Brazil devoted all of its resources to

producing wheat, it would be producing at point A. If however it had devoted all of its resources to producing
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