Assume that a country produces and consumes two goods, cloth and machines, and is in equilibrium in

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Assume that a country produces and consumes two goods, cloth and machines, and is in equilibrium in autarky. It now finds that it can trade at international prices where (Pcloth/Pmachines) on the world market is greater than (Pcloth/Pmachines) in the domestic market. Should it trade? If so, what commodity should it export? Why? Will it gain from trade? How do you know?
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International Economics

ISBN: 9780078021671

8th Edition

Authors: Dennis Appleyard, Alfred Field

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