two nations (1 and 2) which have the same technology but different factor endowments and tastes, (2) two commodities (X and Y) produced under increasing costs conditions and (3) no transportation costs, tariffs or other obstructions to trade. Prove geometrically that mutually advantageous trade between the two nations is possible. Note: Your answer should show the autarky (no-trade) and free-trade points of production and consumption for each nation, show gains from trade of each nation and express the equilibrium condition that should prevail when trade Stop equilibrum
two nations (1 and 2) which have the same technology but different factor endowments and tastes, (2) two commodities (X and Y) produced under increasing costs conditions and (3) no transportation costs, tariffs or other obstructions to trade. Prove geometrically that mutually advantageous trade between the two nations is possible. Note: Your answer should show the autarky (no-trade) and free-trade points of production and consumption for each nation, show gains from trade of each nation and express the equilibrium condition that should prevail when trade Stop equilibrum
Chapter28: International Trade
Section: Chapter Questions
Problem 8P
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Question
Givenw: (1) two nations (1 and 2) which have the same
technology but different factor endowments and tastes, (2)
two commodities (X and Y) produced under increasing
costs conditions and (3) no transportation costs, tariffs or
other obstructions to trade.
Prove geometrically that mutually advantageous trade
between the two nations is possible.
Note: Your answer should show the autarky (no-trade) and
free-trade points of production and consumption for each
nation, show
the equilibrium condition that should prevail when trade Stop equilibrum
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