This exercise applies the basic Ricardian model of one factor and two goods. The

Question

This exercise applies the basic Ricardian model of one factor and two goods. The table below contains the unit labor requirements in Home for each of two goods Shrimp LS -1 hour per pound Glue Home aLo 3 hours per galion where as aLG Ps PG number of labor hours needed to produce a unit of shrimp in Home, number of labor hours needed to produce a unt of glue in Home, the price per pound of shrimgp = the price per gallon of glue f the price per galion of glue Po) is $12. the hourly wage rate in the glue sector of Hame's economy will be O A. $36 O B. $12 O D. S025

Explanation / Answer

Hours required per gallon of Glue = 3 hours

Price per gallon = $12

Hourly wage rate = Price per gallon/Hours required per gallon of glue

Hourly wage rate = $12 / 3 hours = $4

Hence, correct answer is c. $4

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