Table 3.1
Use the data in the table below to answer the following question(s):
Output per Hour Worked

-Based on Table 3.1,trade between the United States and Mexico will occur as long as the relative price of shoes is between
A)three computers and one computer.
B)three computers and two computers.
C)one-half computer and one-third computer.
D)six computers and three computers.
E)None of the above.

Question

Table 3.1
Use the data in the table below to answer the following question(s):
Output per Hour Worked
 
-Based on Table 3.1,trade between the United States and Mexico will occur as long as the relative price of shoes is between
A)three computers and one computer. 
B)three computers and two computers. 
C)one-half computer and one-third computer. 
D)six computers and three computers. 
E)None of the above.

Quizplus · Accepted Answer

According to Table 3.1, the United States can produce one computer in the same time it takes to produce two shoes, while Mexico can produce one computer in the same time it takes to produce three shoes. Therefore, the relative price of shoes in the United States is 1/2 computer per shoe (1 computer/2 shoes) and in Mexico, it is 1/3 computer per shoe (1 computer/3 shoes). Trade between the United States and Mexico will occur as long as the relative price of shoes is between the opportunity cost of producing shoes in both countries, which is between 1/2 computer per shoe and 1/3 computer per shoe, thus the answer is C.

Table 3.1 Use the Data in the Table Below to Answer the Answer