Suppose that the wage rate in country A is three times the wage rate in country B. In this situation, in the context of the Classical/Ricardo trade model, country A would be able to export goods to country B in industries where
A) A's workers were less than one-third as productive as B's workers.
B) A's workers were equally as productive as B's workers.
C) A's workers were less than three times as productive as B's workers.
D) B's workers were less than one-third as productive as A's workers.

Question

Quizplus · Accepted Answer

In the Classical/Ricardo trade model, trade between countries is driven by comparative advantage, not absolute wage levels. Country A would be able to export goods to country B in industries where A's workers are significantly more productive compared to B's workers. If B's workers are less than one-third as productive as A's workers, despite A's higher wage rate, A retains a comparative advantage in those industries because its productivity advantage outweighs the wage rate difference.

Suppose That the Wage Rate in Country a Is Three