Answer to Question #178755 in Macroeconomics for Zaa

Question

Given the following table:

 US UK

Commodity-X (units/man hour) 24 4

Commodity-Y (units/man hour) 16 8

If U.S exchange 24X for 24Y with U.K.

i. What is the gain to US and UK?

 ii. What is the range for mutually beneficial trade?

iii. What is the dollar price of commodity X in the U.S if the wage rate is $48?

iv. What is the pound price of commodity X in the U.K if the wage rate is £8?

 v. What is the dollar price of commodity Y in the U.K if £1 = $2?

 vi. What is the pound price of commodity Y in the U.S if £1 = $2?

Answer 1

i. The US will get the goods at a cheaper price, and the UK will sell its goods

 ii. from 16.8 to 24.4

iii. $24.4\times48=1171.2$

iv. $16.8\times8=134.4$

 v. $134.4\times2=$ 268.8

 vi. $\frac{1171.2}{2}=585.6$