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Question #1: Now suppose the world relative price of cars is PC/PTV = 1. a.In what good will each country specialize? Briefly explain why. b.Label

Question #1: Now suppose the world relative price of cars is PC/PTV = 1.

a.In what good will each country specialize? Briefly explain why.

b.Label the exports and imports for each country. How does the amount of Home exports compare with Foreign imports?

c. Does each country gain from trade? Briefly explain why or why not.

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