Question: Suppose that country A is endowed with two goods, tuna and milk, and composed of two citizens. one a tuna fisherman and the other a dairy fanner. The tuna fisherman is endowed with 3 units of tuna and 1 unit of milk. The dairy farmer is endowed with 3 units of milk and lunit of tuna. Both citizens share the same set of (homothetic) preferences: they only consume tuna and milk in fixed and equal proportions (e.g., I unit of tuna with 1 unit of milk, 2 units of tuna with 2 units of millc, etc.).
Q1. Show that the autarky relative price for country A is not uniquely determined, and in fact can lie anywhere in the interval between zero and infinity.
Q2. What happens if country A opens its borders to trade with the rest of the world?