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Assume that a small, open economy that exports labor-intensive goods experiences a reduced world market price for its export goods. Illustrate what effect this price
Assume that a small, open economy that exports labor-intensive goods experiences a reduced world market price for its export goods. Illustrate what effect this price drop will have on the country's factor prices and resource allocation with the help of production possibilities curve with capital-intensive goods on the x-axis, and labor-intensive goods on the y-axis and a budget line (slope - p_x/p_y).
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