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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. Wine Cheese alc = 6 hours per pound Home alw = 5 hours per gallon Foreign alc = 2 hours per pound alw = 6 hours per gallon where: alc alw = number of labor hours needed to produce a unit of cheese in Home; = number of labor hours needed to produce a unit of wine in Home; = number of labor hours needed to produce a unit of cheese in Foreign; = number of labor hours needed to produce a unit of wine in Foreign; * alc aLW Pc Pw = the absolute or money price of cheese on world markets; the absolute or money price of wine on world markets. As long as the world equilibrium relative price (PC/Pw) lies between 0.33 and 1.2 gallons, the two countries will specialize, with all Foreign workers producing In the post-trade equilibrium the wage of workers in Foreign relative to the wage of workers in Home will lie between O A. 0.83 and 3. B. 0.33 and 3. O C. 1.2 and 0.83. OD. 2 and 5. 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. Wine Cheese alc = 6 hours per pound Home alw = 5 hours per gallon Foreign alc = 2 hours per pound alw = 6 hours per gallon where: alc alw = number of labor hours needed to produce a unit of cheese in Home; = number of labor hours needed to produce a unit of wine in Home; = number of labor hours needed to produce a unit of cheese in Foreign; = number of labor hours needed to produce a unit of wine in Foreign; * alc aLW Pc Pw = the absolute or money price of cheese on world markets; the absolute or money price of wine on world markets. As long as the world equilibrium relative price (PC/Pw) lies between 0.33 and 1.2 gallons, the two countries will specialize, with all Foreign workers producing In the post-trade equilibrium the wage of workers in Foreign relative to the wage of workers in Home will lie between O A. 0.83 and 3. B. 0.33 and 3. O C. 1.2 and 0.83. OD. 2 and 5
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