Output per Labor Hour ____________________________________ Country Wine Cloth Un
ID: 1119299 • Letter: O
Question
Output per Labor Hour ____________________________________
Country Wine Cloth
United States (U.S.) 40 bottles 40 yards
United Kingdom (U.K.) 20 bottles 10 yards
15. According to the principle of absolute advantage, U.S. should
a.Export Wine b.Export Cloth c.Export Wine and Cloth d.None of the above; there is no basis for trade 16. According to the principle of comparative advantage:
a.United States should export Cloth b.United Kingdom should export Cloth c.United States should import Cloth d.United Kingdom should import Wine
17. With international trade, what is the maximum number of yards of cloth that U.S. would be willing to export to U.K. in exchange for each bottle of wine?
a.1 yard b.2 yards c.3 yards d.4 yards
Explanation / Answer
15) Option c is correct, US should export both wine and cloth (labour productivity is higher for both of them)
16) Option a is correct, US should export cloth (opportunity cost is lower for production of 1 unit of cloth in the US)
17) Option a is correct (Max. number of yards of cloth = opportunity cost of 1 bottle of wine = 40/40 = 1 yard of cloth)
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