The following table shows the units of calculators and rice produced by a laborer in a day in Japan and Korea.Table 20.3

-Refer to Table 20.3. Determine the limits on the terms of trade for 1 pound of rice.

Question

The following table shows the units of calculators and rice produced by a laborer in a day in Japan and Korea.Table 20.3
 
-Refer to Table 20.3. Determine the limits on the terms of trade for 1 pound of rice.

Quizplus · Accepted Answer

To determine the limits of terms of trade, we need to compare the opportunity cost of producing rice and calculators in Japan and Korea. In Japan, a laborer can produce 1 pound of rice in exchange for 2 calculators (20 calculators / 10 pounds of rice). In Korea, a laborer can produce 1 pound of rice in exchange for 5 calculators (15 calculators / 3 pounds of rice). Therefore, the terms of trade for 1 pound of rice must be between two-fifths of a calculator (the opportunity cost for Japan) and 1 calculator (the opportunity cost for Korea), which is option E.

The Following Table Shows the Units of Calculators and Rice