With no international trade, the Australian price of wheat is lower than the world price of wheat. This indicates that Australia ________ a comparative advantage in the production of wheat and, with international trade, Australia will ________ wheat.

Question

Quizplus · Accepted Answer

If the Australian price of wheat is lower than the world price, it means that Australia has a comparative advantage in producing wheat, i.e. it can produce wheat at a lower opportunity cost than other countries. Therefore, with international trade, Australia should export wheat to take advantage of its comparative advantage. Therefore, option C is the correct answer.

With No International Trade, the Australian Price of Wheat Is