Question
In the autarky equilibrium, the price of the manufactured good is three times as expensive as the price of the agricultural good.This ratio implies that
In the autarky equilibrium, the price of the manufactured good is three times as expensive as the price of the agricultural good.This ratio implies that the marginal production of labor in manufacturing is _________ times as high as the MPL in agriculture in the autarky equilibrium.
Now, assume that the country opens up to trade with another country where the autarky equilibrium price of the manufactured good is equal to the autarky equilibrium price of the agricultural good.
- The first country now has a comparative advantage in the _________ good.
When the first country opens up to trade, describe the pattern of specialization that will occur.How is this similar to or different than in the Ricardian Model?
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