Given the Following Ricardo-Type Table Showing the Amount of Labor

question 17

Multiple Choice

Given the following Ricardo-type table showing the amount of labor input required to produce one unit of output of each of the two goods in each of the two countries:
$\begin{array} { l l l } &\underline{ \text { Wheat} } &\underline{ \text { Clothing} } \\\text { United Kingdom } & 6 \text { days } & 5 \text { days } \\\text { United States } & 4 \text { days } & 3 \text { days }\end{array}$
Suppose that the U.S. wage rate is $60 per day and that the exchange rate is $2 = £1 (or £0.5 = $1) . In this situation, the lower limit for the U.K. wage rate in order to have two-way trade would be __________ per day.

• A) £18
• B) £20
• C) £45
• D) £50

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Definitions:

Accounting Break-even Point

The point at which total costs and total revenues are equal, resulting in no net loss or gain.

Fixed Cost

are business expenses that remain constant regardless of the level of production or sales, such as rent or salaries.

Depreciation

The process of allocating the cost of tangible assets over their useful lives, reflecting wear and tear or obsolescence.