If the dollar price of a good manufactured in the U.S. is $6 and the dollar price of the same good manufactured in India is $8, should retailers of the good in the U.S. purchase the good from Indian suppliers or from American suppliers?
What will be an ideal response?
The ratio of dollar price of U.S. toy to the dollar price of an Indian toy is 6/8 = 0.75. Since this ratio is less than one, toy resellers in the U.S. should purchase toys from American suppliers rather than Indian suppliers.
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