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This exercise applies the basic Ricardian model of one factor and two goods. The table below contains the unit labor requirements in Foreign and Home
This exercise applies the basic Ricardian model of one factor and two goods. The table below contains the unit labor requirements in Foreign and Home for each of two goods. Use this information to answer the question that follows. Chocolate WhiskeyI Home aLC = 6 hours per pound ab\" = 5 hours per gallon Foreign a :0 = 2 hours per pound afw = 4 hours per gallon where abs = number of labor hours needed to produce a unit of chocolate in Home; aLW = number of labor hours needed to produce a unit of whiskey in Home; , number of labor hours needed to produce a unit of chocolate in Foreign; a LC a:W = number of labor hours needed to produce a unit of whiskey in Foreign; PC = the price per pound oi chocolate on world markets; PW = the price per gallon of whiskey on wodd markets Which of the following statements is tme? O A. Foreign specializes in The production of chocolate and whiskey. O B. Foreign specializes in the production ofwhlskey. O C. Home specializes in the production of chocolate and whiskey O D. Home specializes in the production of whiskey
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