Question
Suppose the U.S. needs 20 units of labor to make 100 tons of steel and 30 units of labor to produce 900 feet of lumber.
Suppose the U.S. needs 20 units of labor to make 100 tons of steel and 30 units of labor to produce 900 feet of lumber. In Canada, 20 units of labor are required to produce 60 tons of steel and 25 units of labor to produce 1,000 feet of lumber.Assume the marginal productivities of labor are constant in each country. Assume that U.S. has a population of 300 million and Canada has 35 million, all of whom provide one unit of labor.
a.If the U.S. and Canada began to trade, the free trade price ratio would lie in the interval [L,H].What are L and H?
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