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Strategies for Global Value Added: Gains Comparative advantage - page 17 / 30

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17

Trade and the product mix

Production function: Zero profit condition:

QA1  =  gA1 LA1 PA1 QA1  = WA LA1

PA1 = WA /gA1

Price of each good equals the unit cost of labor

This shows the tradeoff between the cost and productivity of labor

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