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    Ricardian model

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    Describe how relative prices for goods change in the Ricardian model when trade occurs.

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    Describe how relative prices for goods change in the Ricardian model when trade occurs.
    To begin with the slope of the production possibilities frontier reflects the opportunity cost of one of goods in terms of the other goods. It is assumed that in an autarky equilibrium two products are produced and consumed. There is a coincidence of the price ratio and opportunity cost ratio because in competition, ...

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