Use the information in this table on labor productivities in France and Germany to answer what are the upper and lower bounds for the trade price of cheese?
Output per Hour Worked
The productivity of France is higher in cheese.
The productivity of Germany is higher in car
The France productivity = 0.25 car/2 kilo =(1/4)/2 =1/8 car per kilo
The German productivity = 0.5 car/1 kilo = 1/2 car per kilo
Hence price will be somewhere between 1/8 car per kilo to 1/2 car per kilo
Hence price will be somewhere between 0.125 car per kilo to 0.5 car per kilo
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