Question

A) Explain why relative prices of two goods, both produced in each of two countries, will differ prior to any trade taking place ("autarky"). Why profit-seeking will cause each country to specialize - wholly or partially - in producing one of the goods, and why this specialization will increase total world output and income?

B) Explain how "perfect" competition differs from "imperfect" competition, and how firms in so called "oligopolistic" industries might be expected to adjust their prices and outputs in the latter type of structure.

 

Explain Well, in details not shortened.