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5. Assume again that the two countries specialize as you suggested in Question 2 and that India exports 20% of its production to Germany using
5. Assume again that the two countries specialize as you suggested in Question 2 and that India exports 20% of its production to Germany using a negotiated trade price that sits exactly in the middle of their two domestic prices. a) What would be this middle price (in units of tea for bear)? b) What would be the respective consumption of tea and beer in the two countries? c) Who benefits the most out of this trade arrangement and why?
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