Principles of Macroeconomics 7th Edition

Published by South-Western College
ISBN 10: 1-28516-591-8
ISBN 13: 978-1-28516-591-2

Chapter 9 - Application: International Trade - Questions For Review - Page 189: 1

Answer

If domestic price is above world price then a country does not have a comparative advantage, but if a country has a domestic price below the world price then it has a comparative advantage in producing the product and will export this product.

Work Step by Step

Understand what these words mean. Domestic price is the price that a country can sell for given production cost. World price is the price that across the globe is accepted as the lowest possible price throughout trade. A country that can produce cheaper than that should export theirs at a lower price than the world price if it costs them more to produce it than world price they should just import the product to save money and not produce the product.
Update this answer!

You can help us out by revising, improving and updating this answer.

Update this answer

After you claim an answer you’ll have 24 hours to send in a draft. An editor will review the submission and either publish your submission or provide feedback.