Studies in International Environmental Economics

Theory and observation set out the conditions such that market prices of outputs and productive inputs select an allocation of factor inputs by comparative advantage, so that (relatively) low-cost inputs go to producing low-cost outputs. Further, assume (1) everyone has perfect information, (2) consumers and producers are price-takers, 93) there is a costless court system for enforcing agreements, (4) producers maximize profits and consumers maximize utility, (5) there are no income or wealth effects, and (6) there are no transaction costs.

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