In Question #15 above, if the U.S. wage rate is $40 per day and the exchange rate is £1 = $1, what is the upper limit to the wage rate in the United Kingdom that is consistent with Two-way trade between the countries?
A) £26? per day
B) £30 per day
C) £32 per day
D) £40 per day

Question

Quizplus · Accepted Answer

The upper limit to the wage rate in the United Kingdom that is consistent with two-way trade between the countries would be the same as the U.S. wage rate when converted using the exchange rate. Since the exchange rate is £1 = $1, the upper limit to the wage rate in the UK would be £40 per day, matching the U.S. wage rate of $40 per day. This ensures that the cost of labor, and thus the cost of production, does not disadvantage either country in trade.

In Question #15 Above, If the U