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1.Suppose there are two countries: Domestic, D, and Foreign, F. Both countries can produce two goods: X and Y. Where X is relatively Labour intensive.
1.Suppose there are two countries: Domestic, D, and Foreign, F. Both countries can produce two goods: X and Y. Where X is relatively Labour intensive. They have identical preferences and production functions. They differ only in their endowment of Capital, K, and Labour, L. The charts below show the autarkic positions of each country.
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