You are given the information shown in the table about production relationships in Australia and the rest of the world in terms of labour.

	Input per unit of wheat output	Input per unit of cloth output
Australia	75	100
Rest of the World	50	50

You make several Ricardian assumptions: These are the only two commodities, there

are constant ratios of input to output whatever the level of output of wheat and cloth, and

competition prevails in all markets.

i. Does Australia have an absolute advantage in producing wheat or Cloth? Briefly explain.

ii. Does Australia have a comparative advantage in producing wheat? Cloth? Briefly explain.

iii. If no international trade were allowed, what price ratio would prevail between wheat and cloth within Australia?

iv. If free international trade is opened up, what product will Australia export? Which product will Australia import? Briefly explain.