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In a World of Two Goods and Two People, Explain

Question 121

Essay

In a world of two goods and two people, explain why there are gains from trade if:
a. one person can produce only one good and the other person can produce only the other good.
b. each person can produce both goods but can produce one of the goods only at a great cost.

Correct Answer:

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a. In this situation, both individuals a...

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