Exhibit 29-2 -Suppose the Relative Price of Computers and Rice in Japan

question 157

Multiple Choice

Exhibit 29-2
-Suppose the relative price of computers and rice in Japan is 2 computers per unit of rice. The relative price of computers and rice in Korea is 1/2 computer per unit of rice. If the two countries trade without government restrictions, transportation costs are negligible, and markets are competitive, then the likely terms of trade will fall in the range of

• A)3 computers per unit of rice.
• B)5 computers per unit of rice.
• C)1/4 computer per unit of rice.
• D)1 computer per unit of rice.
• E)2 computers per unit of rice

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