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5. Bernhofen and Brown. Consider a endowment model of one country with a representative consumer opening to trade with / goods. The country has an
5. Bernhofen and Brown. Consider a endowment model of one country with a representative consumer opening to trade with / goods. The country has an endowment e = {e1, e2, e3, ..., en}, where e, is the endowment of good i. In autarky, there are equilibrium prices p* = {pf , pa , pa , .. .,p.} that leads domestic consumers to choose dA = {df, da, da, ...,da} where the amount demanded of each good is equal exactly to amount in the endowment e here choosing dA = e is the optimal choice given their preferences (which we won't be specific about here) and the budget set at equilibrium prices Et_ pidA >_ pie,. Show that this implies that if we look at the net export quantities the country chooses in free trade and calculated the their value at autarky prices, the value would be negative pA . xT = _?_, pic?
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