Given the following Classical-type table shows the number of days of labor input Required to obtain one unit of output of each of the three commodities in each of the two Countries:
$\begin{array} { l l l l }
&\underline{ \text { good T }} & \underline{\text { good X} } & \underline{\text { good Y }} \
& & & \
\text { United Kingdom } & \text { 4 days } & \text { 5 days } & 3 \text { days } \
\text { United States } & 4 \text { days } & 4 \text { days } & \text { 2 days }
\end{array}$
Suppose that the wage rate in the United Kingdom is £30 per day, the wage rate in the United States is $40 per day, and the exchange rate is £1 = $1. In this situation, the United Kingdom will
A) export good T and import goods X and Y.
B) export good Y and import goods T and X.
C) export goods T and X and import good Y.
D) export goods X and Y and import good T.

Question

Given the following Classical-type table shows the number of days of labor input Required to obtain one unit of output of each of the three commodities in each of the two Countries:
$\begin{array} { l l l l } 
&\underline{ \text { good T }} & \underline{\text { good X} } & \underline{\text { good Y }} \
& & & \
\text { United Kingdom } & \text { 4 days } & \text { 5 days } & 3 \text { days } \
\text { United States } & 4 \text { days } & 4 \text { days } & \text { 2 days }
\end{array}$
Suppose that the wage rate in the United Kingdom is £30 per day, the wage rate in the United States is $40 per day, and the exchange rate is £1 = $1. In this situation, the United Kingdom will
A) export good T and import goods X and Y.
B) export good Y and import goods T and X.
C) export goods T and X and import good Y.
D) export goods X and Y and import good T.

Quizplus · Accepted Answer

To determine which goods countries should export or import, we need to compare the opportunity costs of producing each good domestically. Opportunity cost refers to the value of the next best alternative forgone.

In the United Kingdom, the opportunity cost of producing one unit of T is 4/30 = 2/15 units of Y or 4/5 units of X. The opportunity cost of producing one unit of X is 5/30 = 1/6 units of Y or 4/5 units of T. The opportunity cost of producing one unit of Y is 3/30 = 1/10 units of X or 2/15 units of T.

In the United States, the opportunity cost of producing one unit of T is 4/40 = 1/10 units of Y or 1 unit of X. The opportunity cost of producing one unit of X is 4/40 = 1/10 units of Y or 1 unit of T. The opportunity cost of producing one unit of Y is 2/40 = 1/20 units of X or 1/10 units of T.

Comparing the opportunity costs of the two countries, we see that the UK has a comparative advantage in producing good T and X, while the US has a comparative advantage in producing good Y. Therefore, the UK should export T and X and import Y, while the US should export Y and import T and X.

Therefore, the correct answer is C) export goods T and X and import good Y.

Given the Following Classical-Type Table Shows the Number of Days