In Home, the autarky relative price of apples is 5. In Foreign, the autarky relative price of apples is7. After opening to trade, which country will specialize in producing apples?

a. Home

b. Foreign

The answer is a) home

Explanation:

Home ' s apple price is lower that of foreign, and this is likely to give Home an advantage in international trade. The lower price could mean Home has economies of scale (producing large quantities at relatively lower costs).