Question

Use the following information for the next two questions: A German worker takes 400 hours to produce a car and 2 hours to produce a case of wine. A French worker takes 600 hours to produce a car and X hours to produce a case of wine.

13) If X is ____________ Germany will export cars and import wine.

a) larger than 1/3 b) smaller than 3 c) larger than 3 d) smaller than 1/3

14) If X is _______ no gains from trade are possible.

a) 1/3 b) 2 c) 600 d) 3

Q13.) C.) Larger than 3

Note that opportunity cost of producing a car in Germany is 200 case of wine. Therefore, if France wants to export cars then it's opportunity cost must be smaller than that in case of Germany. Thus any value of X larger than 3 for example X is 6 then opportunity cost of producing a car in Germany is only 100 case of wine which will be lower than 200 in case of Germany.

14.) d.) 3

Note that if X is equal to 3 then opportunity cost of producing any product in given countries will be same , thus, no gains from trade if X= 3.