If Brazil specializes in coffee production and Peru specializes in wheat production, what underlying economic principle explains this decision despite Brazil's absolute advantage in coffee?

The economic principle that explains Brazil's and Peru's decision to specialize in coffee and wheat, respectively, is called opportunity cost. Opportunity cost is what you give up when you choose one option over another. Even though Brazil can produce more coffee than Peru, it may give up less wheat by focusing on coffee production, while Peru gives up less coffee by focusing on wheat. For example, if Brazil can produce 10 tons of coffee or 5 tons of wheat, and Peru can produce 4 tons of coffee or 8 tons of wheat, Brazil benefits more by producing coffee, which allows Peru to produce wheat more efficiently. This way, both countries can trade and end up with more coffee and wheat than if they tried to produce both on their own.