A nation practicing autarky has a domestic price of extremely tight pants that is lower than the world price. If the nation opened up trade,

• A. It would become an extremely tight pants exporter because the nation has a comparative advantage in producing extremely tight pants.
• B. t would become an extremely tight pants importer because the nation has a comparative advantage in producing extremely tight pants.
• C. It would become an extremely tight pants exporter because the nation does not have a comparative advantage in producing extremely tight pants.
• D. It would become an extremely tight pants importer because the nation does not have a comparative advantage in producing extremely tight pants.

Answer: (A)

Verified step by step guidance

1. Understand the concept of autarky: Autarky is a situation where a nation is self-sufficient and does not engage in international trade. The domestic price of goods is determined by domestic supply and demand.
2. Identify the domestic price relative to the world price: In this scenario, the domestic price of extremely tight pants is lower than the world price, indicating that the nation can produce these pants more cheaply than the rest of the world.
3. Determine comparative advantage: A nation has a comparative advantage in producing a good if it can produce it at a lower opportunity cost than other nations. The lower domestic price suggests a comparative advantage in producing extremely tight pants.
4. Predict the trade outcome: When a nation opens up to trade, it will export goods for which it has a comparative advantage. Since the domestic price is lower than the world price, the nation will likely export extremely tight pants.
5. Conclude the analysis: The nation would become an exporter of extremely tight pants because it has a comparative advantage in producing them, as indicated by the lower domestic price compared to the world price.