You have two countries, A and B, two factors of production, L and K, and two commodities, X and Y. A is labor-abundant, B is capital-abundant, X is labor-intensive, Y is capital intensive, and the tastes in the two countries are identical.
(a) Draw the production possibilities frontiers, the community indifference curves of the two countries in autarky and in international trade equilibrium.
(b) Explain the problems involved in using the individual indifference curves as community indifference curve and under what conditions we can use them.
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