need help for A-level econs mcq questions

waves SG

Hello, got 1 question related to International Trade. Pls help cos I couldn't get it right at all.

In country 1, x1 and y1 are the unit labour costs of producing commodities X and Y. x2 and y2 are the costs in country 2. (old syallbus June 96 qn)

Country 1 will export commodity X and import commodity Y if:

A) x1/y2 is greater than x2/y1

B) x1/x2 is greater than y1/y2

C) x1/y1 is less than x2/y2

D) x1/y2 is less than x2/y1

Pls help and explain. Thanks so much!

vIn.Warrior SG

why you study old syllabus?

skythewood SG

country 1 will export X and import Y, if it is cheaper to produce X. more expensive to produce Y, when compared to country 2..

A ==> not enuff info

B ==> wrong

C ==> this is correct

D ==> not enuff info.

waves SG

i know the answer is c. but i dunno why. and why not enough info? sorry can give a more detailed explanation? thanks man.

skythewood SG

that means you cannot determined the answer from the given thingie.

A) x1/y2 is greater than x2/y1 ===> this doesn't tell you anything that you can use to determine the answer.

C) This implies what i mentioned, that's why i say this is correct. this can only mean this ==> country 1 will export X and import Y, if it is cheaper to produce X. more expensive to produce Y, when compared to country 2..

caleb_chiang SG

bring a dice...

skythewood SG

think i give example easier to understand.

For A) and D).

rectangle 1, rectangle 2.

i compare long side of rectangle 1 to short side of rectangle 2.

i compare short side of rectangle 1 to long side of rectangle 2.

by comparing the ratio, which rectangle is more squarish?

For C) and B)

rectangle 1, rectangle 2.

i compare long side of rectangle 1 to long side of rectangle 2.

i compare short side of rectangle 1 to short side of rectangle 2.

by comparing the ratio, which rectangle is more squarish?

waves SG

okay i tell you how i actually do it and pls tell me why my method is wrong.

i came up with the terms of trade for both countries. Since country 1 export commodity x, it means that they have a comparative advantage in x and will produce it.

Country 1 = 1x : 1y (x1 : y1)

Country 2 = 1x : 3y (x2 : y2)

(shows that country 1 has comparative advantage in x)

when i sub in the number accordingly to the equation of the options, end up c is not correct and b and d are actually correct. :((

skythewood SG

If I come up with this,

Country 1 = 1x : 1.1y (x1 : y1)

Country 2 = 1.1.x : 1y (x2 : y2)

(shows that country 1 has comparative advantage in x)

than i sub in the number,

A) x1/y2 is greater than x2/y1

B) x1/x2 is greater than y1/y2

C) x1/y1 is less than x2/y2

D) x1/y2 is less than x2/y1

skythewood SG

okay i tell you how i actually do it and pls tell me why my method is wrong.

i came up with the terms of trade for both countries. Since country 1 export commodity x, it means that they have a comparative advantage in x and will produce it.

Country 1 = 1x : 1y (x1 : y1)

Country 2 = 1x : 3y (x2 : y2)

(shows that country 1 has comparative advantage in x)

when i sub in the number accordingly to the equation of the options, end up c is not correct and b and d are actually correct. :((

there are more than one permutation you can come up with, and you should come up with the permutation from the answers, instead of using a random permutation to try to get the answer.

waves SG

okay your explanation makes sense, thanks. also appreciate any more ppl who can come up with more explanations.