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I don't how to do it graphically . I need to sketch the diagram.


5) Assume that a country produces and consumes two goods, cloth and machines, and is in
equilibrium in autarky. It now finds that it can trade at international prices where (Pacts/Pagans.)
on the world market is greater than (Pam/Pmmfi) in domestic market. Should it trade? If so, what
commodity should it export? Will it gain from trade?

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