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1. (Standard Trade Model) Assume there are two countries (home vs. foreign) in the world and two commodities (banana vs. honey) could be produced by

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1. (Standard Trade Model) Assume there are two countries (home vs. foreign) in the world and two commodities (banana vs. honey) could be produced by these countries. The pro- duction possibility frontier for home and foreign are countries are given below respectively: Q +dQ=T, m(Q1)2 +n(Qm)2 = K, where Q6 and Qh represent banana and honey production at home and Q6 and QH rep- resent banana and honey production at foreign country. Assume preference of the repre- sentative household in the home country (not foreign) is as below: u(Dc, Df) = Dy + Din = where Db, Dh represents banana and honey consumption respectively. Choose the numer- ical values yourself for parameters c, d, T, m, n, and a such that c>0, d > 0, m > 0, n > 0, T > 0, c# m, d #n, and 0 0, d > 0, m > 0, n > 0, T > 0, c# m, d #n, and 0

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