Answer to Question #61793 in Microeconomics for Yavonna

Question

(b) Initially, both Australia and the US spent half a day producing ethanol and half a day producing wheat. However, they now decide to specialise in producing the product that they have a comparative advantage and trade their products in the world market. What are the total gains from trade?

Answer 1

The overall world trade is going to win from the situation, since both countries are going to produce the competitive goods in the maximum amount.