number of labor hours needed to produce a unit of wine in Fo

number of labor hours needed to produce a unit of wine in Foreign; LW PC = the price per pound of cheese Pw = the price per gallon of wine on world Quantity of wine (gallons) 12 n world markets; markets Which of the following conditions will induce Foreign to specialize in cheese? 40 PF Suppose Foreign were to trade with Home at the relative price of (Pc/Pw)-1.0 0 20 40 60 80 100 120 140 Quantity of cheese (pounds) Using the line drawing tool, add the consumption possibilities frontier for Foreign to its production possibilities frontier. Properly label this line (100,80) Carefully follow the instructions above and only draw the required object.

Solution

We see that Pc / Pw = 1 ; which means Pc= Pw. hence the first thing we conclude is that price of cheese is same as price of wine.

So when we check relative Pc/ alc & Pw/ alw , we sould go for the one which is higher. Because all the things are relative we sould go for relative comparision and and not absolute comparison. So option B & D is chucked out automatically.

In between option A & C, we should go for option A because the country can produce more of cheese than wine with same level of labour hours..

Hence option A.