If Australia is better than the US at producing wheat, but the US is better than Australia at producing cars, the US should:

Question

Quizplus · Accepted Answer

By selling cars to Australia and buying Australian wheat, both countries can specialize in their comparative advantages and benefit from trade. This allows for resources to be used more efficiently and ultimately increases overall economic welfare. Imposing a tariff on Australian wheat or subsidizing the US wheat industry would lead to higher prices for consumers and distortions in the market. Buying Australian cars instead of selling wheat to Australia would not take advantage of the US's comparative advantage in the car industry.

If Australia Is Better Than the US at Producing Wheat