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 ___________________________________________

2. 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

3. 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 _________£ / $

2. 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

Answer rating: 100% (QA)

The value of the pointer is 3 This means that it takes 3 da... View the full answer