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When Australia has a closed economy for flowers, a bouquet of flowers sells for $50. Assuming Australia does not

have the comparative advantage (CA) in the production of flowers, the opening up the flowers market in Australia to international trade will result in Australian producers being better off as the price of flowers will exceed $50.

How should I go about correcting this statement and providing a brief example to prove my case?

Just need to state that with no CA, international trade will lower prices and that pressurises less efficient domestic producers - how should I explain this and with what could be an example?

Top Answer

Lack of comparative advantage means that Australian prices will be higher than the world prices as it has higher opportunity... View the full answer

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