Question

The country Autarka does not allow international trade. In Autarka, you can buy a wool suit for 3 ounces of gold. Meanwhile, in neighboring countries, you can buy the same suit for 2 ounces of gold. If Autarka were to allow free trade, would it import or export wool suits. Why?

Answer 1

Answer:

Yes, it would import wool        

Explanation:

Autarka will import wool from the neighboring country because the country has a comparative advantage in the production of wool and hence wool from the country will be cheaper than what is obtainable in Autarka, Autarka should concentrate in the production of a good they have comparative advantage over the neighboring country in producing and export such good to the neighboring country and import wool.