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The following table shows the hourly output per worker in two industries in Chile and Argentina:
Hats Beer
Chile 8 6
Argentina 1 2
A) suppose that Chile and Argentina currently do not trade with each other. Each has 1,000 hours of labor to use producing hats and beer. Give a numerical example showing how Chile and Argentina can both gain from trade.
Compute the equilibrium levels of B and G consumed and produced in the Home country under autarky. What is the corresponding value of p?
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