Question

In the United States, one worker can produce 10 tons of steel per day or 20 tons of chemicals per day. In the United Kingdom, one worker can produce 5 tons of steel per day or 15 tons of chemicals per day. Which of the following statements is correct? Select one: a. U.S. wages will be higher than U.K. wages. b. U.K. wages will be higher than U.S. wages. c. Wages in the United States and the United Kingdom will be equal. d. There will be no relationship between U.S. and U.K. wages.

Answer 1

Answer:

a. U.S. wages will be higher than U.K. wages.

Explanation:

Wages, which are the factor price for labor, depend on the marginal productivity of labor.

In other words, workers are paid in proportion to the amount of additional output they produce.

In this case, the marginal productivity of a U.S. worker (10 tons of steel, or 20 tons of chemicals) is higher than the marginal productivity of an U.K. worker (5 tons of steel or 15 tons of chemicals), for this reason, the U.S. worker will be paid more than the U.K. worker.