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. Whiskey Cheese Home aLC = 1 hour per pound = aLW 3 hours per gallon Foreign aLC = 5 hours per pound aLw * aLC aLW = 4 hours per gallon = number of labor hours needed to produce a unit of cheese in Home; number of labor hours needed to produce a unit of whiskey in Home; = number of labor hours needed to produce a unit of cheese in Foreign; where: aLC = number of labor hours needed to produce a unit of whiskey in Foreign; aLW Pc =the absolute or money price of cheese on world markets; Pw =the absolute or money price of whiskey on world markets. As long as the world equilibrium relative price (PC/Pw) lies between 0.33 and 1.25 gallons, the two countries will specialize, with all Home workers producing cheese In the post-trade equilibrium the wage of workers in Home relative to the wage of workers in Foreign will lie between A. 1.33 and 5. OB. 0.2 and 5. OC. 0.75 and 1.33. OD. 1 and 4.

ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Question
help please answer in text form with proper workings and explanation for each and every part and steps with concept and introduction no AI no copy paste remember answer must be in proper format with all working
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.
Whiskey
Cheese
Home
aLC
= 1 hour per pound
=
aLW 3 hours per gallon
Foreign
aLC
= 5 hours per pound
aLw
*
aLC
aLW = 4 hours per gallon
= number of labor hours needed to produce a unit of cheese in Home;
number of labor hours needed to produce a unit of whiskey in Home;
= number of labor hours needed to produce a unit of cheese in Foreign;
where:
aLC
= number of labor hours needed to produce a unit of whiskey in Foreign;
aLW
Pc
=the absolute or money price of cheese on world markets;
Pw
=the absolute or money price of whiskey on world markets.
As long as the world equilibrium relative price (PC/Pw) lies between 0.33 and 1.25 gallons, the two countries will specialize, with all
Home workers producing cheese
In the post-trade equilibrium the wage of workers in Home relative to the wage of workers in Foreign will lie between
A. 1.33 and 5.
OB. 0.2 and 5.
OC. 0.75 and 1.33.
OD. 1 and 4.
Transcribed Image Text: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. Whiskey Cheese Home aLC = 1 hour per pound = aLW 3 hours per gallon Foreign aLC = 5 hours per pound aLw * aLC aLW = 4 hours per gallon = number of labor hours needed to produce a unit of cheese in Home; number of labor hours needed to produce a unit of whiskey in Home; = number of labor hours needed to produce a unit of cheese in Foreign; where: aLC = number of labor hours needed to produce a unit of whiskey in Foreign; aLW Pc =the absolute or money price of cheese on world markets; Pw =the absolute or money price of whiskey on world markets. As long as the world equilibrium relative price (PC/Pw) lies between 0.33 and 1.25 gallons, the two countries will specialize, with all Home workers producing cheese In the post-trade equilibrium the wage of workers in Home relative to the wage of workers in Foreign will lie between A. 1.33 and 5. OB. 0.2 and 5. OC. 0.75 and 1.33. OD. 1 and 4.
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