Question

If \(\frac{a_{LX}}{a_{LY}}\) and \(\frac{a^{r}_{LX}}{a^{r}_{LY}}\) are the opportunity costs of producing X in terms of Y in countries A and B, and \(\frac{p_X}{p_Y}\) is the international price ratio of X to Y. Both the Py countries will go for complete specialization when

• A. \(\frac{a_{LX}}{a_{LY}}<\frac{p_X}{p_Y}<\frac{a^{r}_{LX}}{a^{r}_{LY}}\)
• B. \(\frac{a_{LX}}{a_{LY}}=\frac{p_X}{p_Y}<\frac{a^{r}_{LX}}{a^{r}_{LY}}\)
• C. \(\frac{a^{r}_{LX}}{a^{r}_{LY}}=\frac{p_X}{p_Y}<\frac{a_{LX}}{a_{LY}}\)
• D. \(\frac{p_X}{p_Y}<\frac{a^{r}_{LX}}{a^{r}_{LY}}<\frac{a_{LX}}{a_{LY}}\)

Answer 1

The Correct Option is A

The correct answer is (A) : \(\frac{a_{LX}}{a_{LY}}<\frac{p_X}{p_Y}<\frac{a^{r}_{LX}}{a^{r}_{LY}}\).