-Refer to Above Figure

question 58

Essay

-Refer to above figure. In autarky, Country P was producing at point 5. With trade, would its production point be found above or below point 5?
Explain why. What must happen in the K/L intensity ratio in the production of each of the products in this country when moving from autarky to free trade?

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Definitions:

Economic Profits

Economic profits consist of the total revenue generated by a business minus both its explicit and implicit costs, reflecting the actual profitability including opportunity costs.

Cherry Industry

A sector of agriculture focused on the cultivation, harvesting, and marketing of cherries, including both sweet and sour varieties.

Industry Supply

The total amount of goods or services that producers in a specific industry are willing and able to sell at a given price level.

Long-Run Industry Supply

The relation between the price of a good and the total output produced by an industry once all adjustments have been made.