You are given the following Classical-type table showing the output of 10 days labor in the production of each of the two commodities in each of the two countries. Assume that The U.K. worker's wage is £30 per day and that the fixed exchange rate is $2 = £1.
$\begin{array}{lll}
&\underline{\text { Food }}&\underline{\text { Clothing }}\\
\text { United States } & 30 \text { units } & 30 \text { units } \
\text { United Kingdom } & 20 \text { units } & 15 \text { units }
\end{array}$

If trade is taking place between the two countries, what is the "upper limit" to the U.S.Worker's wage per day?
A) $30
B) $40
C) $90
D) $120

Question

You are given the following Classical-type table showing the output of 10 days labor in the production of each of the two commodities in each of the two countries. Assume that The U.K. worker's wage is £30 per day and that the fixed exchange rate is $2 = £1.
$\begin{array}{lll}
&\underline{\text { Food }}&\underline{\text { Clothing }}\\
\text { United States } & 30 \text { units } & 30 \text { units } \
\text { United Kingdom } & 20 \text { units } & 15 \text { units }
\end{array}$

If trade is taking place between the two countries, what is the "upper limit" to the U.S.Worker's wage per day?
A) $30
B) $40
C) $90
D) $120

Quizplus · Accepted Answer

The U.K. worker earns £30 per day, which is equivalent to $60 per day (since $2 = £1). The U.S. worker must earn less than or equal to this amount to remain competitive, so the upper limit is $120 per day.

You Are Given the Following Classical-Type Table Showing the Output