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Open Economy
None of the three economies considered so far are engaged in trade with Foreign Countries. Such economies are often referred to as Closed Economies. In contrast, open economies engage in significant amounts of foreign trade, so that some of the goods produced at home are sold a broad while some of the goods sold at home are produced abroad. The model is more applicable in real life.
what is a firm
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Jane, the manager of a company manufacturing air-conditioning units can choose between two production technologies for a new product line. If she chooses and installs technology 1,
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