Relative Home Productivity Advantage aLlau Good Cars Toys Sh

Relative Home Productivity Advantage aLlau) Good Cars Toys Shoes DVDs ron 4 0.6 Suppose we know that Home produces cars, toys, shoes, and DVDs while Foreign produces DVDs and iron. Given the data in the table above, it can be ascertained that the relative wage (w/w\") isEnter your response as an integer,)

Solution

Note that generally we have the formula for finding the relative wage rate such that w/w* < aLi*/aLi. Here Home produces cars, toys shoes and DVDS so w/w* < 1 and because DVDs are produced by foreign, we have w/w* > 1. Hence we see that the only value relative wage can acquire is 1. This is true because DVDs are produced by both the nations.

Hence w/w* = 1.