In the United States, one worker can produce 10 tons of steel per day or 20 tons of chemicals per day. In the United Kingdom, one worker can produce 5 tons of steel per day or 15 tons of chemicals per day. Which of the following statements is correct?
A) U.S. wages will be higher than U.K. wages.
B) U.K. wages will be higher than U.S. wages.
C) Wages in the United States and the United Kingdom will be equal.
D) There will be no relationship between U.S. and U.K. wages.

Question

Quizplus · Accepted Answer

In the United States, one worker can produce 10 tons of steel per day or 20 tons of chemicals per day. This means that the opportunity cost of producing one ton of steel is 2 tons of chemicals, and the opportunity cost of producing one ton of chemicals is 0.5 tons of steel. In the United Kingdom, one worker can produce 5 tons of steel per day or 15 tons of chemicals per day. This means that the opportunity cost of producing one ton of steel is 3 tons of chemicals, and the opportunity cost of producing one ton of chemicals is 0.33 tons of steel. Since the opportunity cost of producing one ton of steel is higher in the United Kingdom than in the United States, and the opportunity cost of producing one ton of chemicals is lower in the United Kingdom than in the United States, it follows that wages will be higher in the United States than in the United Kingdom.

In the United States, One Worker Can Produce 10 Tons