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Economics

West Virginia University

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please try to answer these questions below and follow the instructions. It is about international economics

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Extra Credit 1 for MT 1 (+2 points): Name: Some discussion: In this question, we try to extend the 2-good model to the 3-good model. If you are interested, see Dornbusch, Fischer and Samuelson (1977, American Economic Review). Let’s review the standard Ricardo model with two countries (A and B) and two goods (S and T). Here, we denote 𝑎𝑖𝑥 as unit labor requirement for good i at country x, whereas we denote 𝑝𝑖𝑥 as autarky price for good i at country x and denote 𝑝𝑖∗ as free trade price for good i. There are three important conditions for the equilibrium of the 2-good model: 1) 𝑝𝑇𝐴 /𝑝𝑆𝐴
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Running head: INTERNATIONAL ECONOMIC QUESTIONS

INTERNATIONAL ECONOMIC QUESTIONS
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INTERNATIONAL ECONOMIC QUESTIONS

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INTERNATIONAL ECONOMIC QUESTIONS
Concept overview
It is not possible for countries to produce all goods and services that they require. Even if
they were able, the cost of production may be extremely high. As a result, countries engage in
trade to get goods and services from other nations at lower prices (Deardorff & Stern, 2011).
Comparative advantage is used to decide the good to be produce...


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