According to the following table,the UK can gain from trade with the US by giving up how much cloth for 9 bushels of wheat?
$\begin{array}{|l|c|c|}
\hline &\text { U.S. }&\text { U.K.} \
\hline \text {Wheat (bushels/hr) }& 9 & 3 \
\hline\text { Cloth (yards/hr) }& 5 & 4 \
\hline
\end{array}$
A)Anything less than 12 yards of cloth
B)Anything greater than 9 yards of cloth
C)Only less than 5 yards of cloth
D)Only greater than 10 yards of cloth

Question

According to the following table,the UK can gain from trade with the US by giving up how much cloth for 9 bushels of wheat? 
$\begin{array}{|l|c|c|}
\hline &\text { U.S. }&\text { U.K.} \
\hline \text {Wheat (bushels/hr) }& 9 & 3 \
\hline\text { Cloth (yards/hr) }& 5 & 4 \
\hline
\end{array}$
A)Anything less than 12 yards of cloth
B)Anything greater than 9 yards of cloth
C)Only less than 5 yards of cloth
D)Only greater than 10 yards of cloth

Quizplus · Accepted Answer

According to the table, the US has a comparative advantage in wheat production, meaning they can produce wheat at a lower opportunity cost than the UK. On the other hand, the UK has a comparative advantage in cloth production, meaning they can produce cloth at a lower opportunity cost than the US. Therefore, for the UK to benefit from trade with the US, they should specialize in cloth production and trade some of their cloth for wheat with the US. The exchange rate for trade should be based on the opportunity cost of each good. From the table, we can see that the UK's opportunity cost of producing 9 bushels of wheat is 4 yards of cloth. Therefore, the UK can gain from trade by giving up anything less than 12 yards of cloth (the cost of producing 27 bushels of wheat domestically). Anything greater than 12 yards of cloth would result in the UK producing wheat domestically, which would not be as efficient as trading with the US.

According to the Following Table,the UK Can Gain from Trade