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You are given the following Classical-type table showing the number of days of labor input required to obtain 1 unit of output of each of

  1. You are given the following Classical-type table showing the number of days of labor input required to obtain 1 unit of output of each of the five commodities in each of the two countries:

Country

Wage Rate

Wheat

Sheet Metal

Cheese

Computers

Cloth

U.S.

$3

2

4

5

2

3

U.K.

1

6

4

3

7

4

  1. Assume that the wage rate in the United Kingdom (WUK) is 1/day, the wage rate in the United States (WUS) is $3/day, and the exchange rate (e) is $1 = 0.5. With this information, determine the goods that will be U.K. exports and the goods that will be U.S. exports.

Value of the pointer is _____________

Goods that U.K. exports to U.S. are __________________________________________

Goods that U.S. exports to U.K. are ___________________________________________

  1. Keeping WUK at 1/day and keeping the exchange rate at $1 = 0.5, calculate the upper and lower limits (in dollars per day) to the U.S. wage rate that are consistent with two-way trade between the countries.

The Upper Limit is _________ $/day

The Lower Limit is _________$/day

  1. With WUK at 1/day and WUS at $3/day, calculate the upper and lower limits (in per $) to the exchange rate that are consistent with two-way trade between the countries.

The Upper Limit is _________ / $

The Lower Limit is _________ / $

  1. In the following two-good, multi-country example of labor requirements, do all the countries stand to gain from trade if the international terms of trade are 1 C = 1.8 W? If so, what commodities will each country export and import?

Country

Wheat

Cloth

U.K.

2

3

France

3

5

U.S.

3

6

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