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Economics Question on Estimation and Costing

If aLXaLY\frac{a_{LX}}{a_{LY}} and aLXraLYr\frac{a^{r}_{LX}}{a^{r}_{LY}} are the opportunity costs of producing X in terms of Y in countries A and B, and pXpY\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

aLXaLY<pXpY<aLXraLYr\frac{a_{LX}}{a_{LY}}<\frac{p_X}{p_Y}<\frac{a^{r}_{LX}}{a^{r}_{LY}}

B

aLXaLY=pXpY<aLXraLYr\frac{a_{LX}}{a_{LY}}=\frac{p_X}{p_Y}<\frac{a^{r}_{LX}}{a^{r}_{LY}}

C

aLXraLYr=pXpY<aLXaLY\frac{a^{r}_{LX}}{a^{r}_{LY}}=\frac{p_X}{p_Y}<\frac{a_{LX}}{a_{LY}}

D

pXpY<aLXraLYr<aLXaLY\frac{p_X}{p_Y}<\frac{a^{r}_{LX}}{a^{r}_{LY}}<\frac{a_{LX}}{a_{LY}}

Answer

aLXaLY<pXpY<aLXraLYr\frac{a_{LX}}{a_{LY}}<\frac{p_X}{p_Y}<\frac{a^{r}_{LX}}{a^{r}_{LY}}

Explanation

Solution

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