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Unformatted text preview: sector do rise following a move to free trade. The payments to factors in the import-competing sector fall in the short run. In the long run, the payments to factors of production used intensively in the export sector rise and payments to the factors used intensively in the import-competing sector fall. This is the Stolper-Samuelson theorem. Total demand is equal to home demand, the demand of domestic consumers, plus foreign demand, demand from foreign consumers. The assumption of free entry drives economic profits for monopolistic competitors to zero. As long as there are economic profits available, firms will enter the market and steal existing firms' customers....
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This note was uploaded on 11/22/2011 for the course FIN FIN1100 taught by Professor Bradrifkin during the Fall '09 term at Broward College.
- Fall '09
- Personal Finance