The tables and the graphs above show that after trade: Select one: a. wheat beco
ID: 1155237 • Letter: T
Question
The tables and the graphs above show that after trade:
Select one:
a. wheat becomes more labor intensive in the US and wheat becomes less labor intensive in rest of the world.
b. cloth becomes more labor intensive in the US and cloth becomes less labor intensive in rest of the world.
c. wheat becomes more labor intensive in the US and cloth becomes less labor intensive in US
d. wheat becomes less labor intensive in the US and cloth becomes more labor intensive in US
e. Both (a) and (b) are correct.
f. None of the above.
Factor Use in Wheat and Cloth United States Before (with No Trade) Rest of the World Before (with No Trade) Land Labor Land/Labor Land Labor Land/Labor Ratio Sector Wheat Cloth Whole economy Output Use Use 35 65 53 100 Output Use 16 18 34 Use Ratio 32 0.500 160 0.113 192 0.177 50 40 35 18 1.000 0.277 0.530 30 80 After (with Free Trade) After (with Free Trade) Land Labor Land/Labor Land Labor Land/Labor Ratio Ratio Sector Wheat Cloth Whole economy Output Use Use Output Use Use 48 80 20 64 0.750 After 36 0.139 Trade 100 25 180 0.139 12 0.750 After Trade 53 100 0.530 34 192 0.177Explanation / Answer
Option e
US
Rest of the world
Land
Labor
Land
Labor
Wheat
1.43
1.43
1.88
0.94
Cloth
2.22
0.62
4.44
0.50
After trade
Wheat
1.67
1.25
1.67
1.25
Cloth
4.00
0.56
4.00
0.56
Now looking at the output to input ratio we can clearly see that for US, wheat becomes more labor intensive(ratio decreases) and it becomes less intensive in the rest of the world(ratio increases)
For cloth the ratio decreases for US and the ratio increases for rest of the world
US
Rest of the world
Land
Labor
Land
Labor
Wheat
1.43
1.43
1.88
0.94
Cloth
2.22
0.62
4.44
0.50
After trade
Wheat
1.67
1.25
1.67
1.25
Cloth
4.00
0.56
4.00
0.56
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