Question:
Create an example of an absolute advantage model by choosing two countries and a single product.
a. Draw a diagram describing autarky and a pattern of absolute advantage for your example.
b. Show the transition from autarky to trade in your diagram, label the trade flows, and demonstrate the gains from trade.
c. In a new diagram, and starting from a trading equilibrium, show what would happen to the world price if income increased by exactly the same, small amount in both countries.