Consider two countries, A and B, with the technologies given by case 3 in Exercise 1.

data from case 3 in exercise 1

Suppose that the wage rate in A, WA, equals \($9\) per hour; then, for mutually beneficial trade to occur, the wage rate in B, when measured in dollars, E * WB, must lie in a range from \($X\) to \($Y.\) Calculate X and Y and explain your answer.

Data from in exercise 1

For each of the following cases below determine the following:

(a) the pretrade relative prices;

(b) the direction of comparative advantage; and

(c) the limits to the relative wage rate.

Transcribed Image Text:

Case 3 S A 9 B 00 8 T 18 4