Question

Suppose countries A and B have the industries in the table below, with the labor requirements...

Suppose countries A and B have the industries in the table below, with the labor requirements specified
for both countries.

Industry

J

K

L

M

N

P

Country A

3

6

7

1

4

2

Country B

4

2

6

1

5

3

In the sentences 1 and 2 below, choose the correct answer.

1. If the ratio of wages in the two countries (A/B), (WA/EWB) is equal to 0.9, then country B will concentrate on producing goods

a.    M, L, and K

b.    L and K

c.    N, P, and M

d.    P, J, and N

2. If the ratio of wages is equal to 0.7, then country B will produce

a.    P and J

b.    only P

c.    L and K

d.    only K

Homework Answers

Answer #1

Here,

1) Let's Assume 1 worker costs in B = B

So in A he will cost = 0.9 B

Now,

J K L M N P
Country A 2.7B 5.4B 6.3B 0.9B 3.6B 1.8B
Country B 4B 2B 6B B 5B

3B

So country B will concentrate on producing K and L as they are less costly as from table above

Hence Answer is option b) L&K

2)

Let's Assume 1 worker costs in B = B

So in A he will cost = 0.7 B

Now,

J K L M N P
Country A 2.1B 4.2B 4.9B 0.7B 2.8B 1.4B
Country B 4B 2B 6B B 5B 3B

So country B will concentrate on producing K as it is less costly as from table above

Hence Answer is option d) K only

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