Assume that the opportunity cost of producing wheat is lower in Australia compared with Malaysia. Further assume that the opportunity cost of producing cars is higher in Australia compared with Malaysia. Which country has a comparative advantage in producing wheat?

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Quizplus · Accepted Answer

Australia has a comparative advantage in producing wheat because its opportunity cost of producing wheat is lower than that of Malaysia. This means that if Australia focuses on producing wheat, it can produce a larger quantity of wheat in comparison to Malaysia, given the same amount of resources and time. Therefore, Australia should specialize in producing wheat, while Malaysia should focus on producing cars.

Assume That the Opportunity Cost of Producing Wheat Is Lower