A. Canada has a Comparative Advantage in producing wheat. Explain what this mean

Question

A. Canada has a Comparative Advantage in producing wheat. Explain what this means.
B. Suppose that demand for wheat in China increases by a large amount, relative to world supply. Draw a diagram to show how this will affect the world price of wheat, the Canadian price of wheat, Canadian wheat production, and Canadian wheat consumption, assuming free trade in wheat.
C. Now use your diagram to explain how this will affect Canadian consumer surplus, producer surplus, and total surplus.
D. If the Canadian government wanted to protect Canadian consumers from increases in the world price of wheat, explain what policies it could use. Would these be good or bad policies? Discuss.

Explanation / Answer

A. Having a comparative advantage in the production of a commodity implies that its opportunity cost in producing that commodity is less than than the production by other country.

So canada is able to produce wheat more efficiently and at a lower opportunity cost.

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