Question

Australia exports large amounts of iron ore to China. In return, China sells Australia-manufactured goods such as electronics and clothing.

Which of the following BEST explains how this voluntary trade benefits both countries?

(1 point)
Responses

Australia loses natural resources while China keeps all the profit.
Australia loses natural resources while China keeps all the profit.

Only China benefits because it gets cheaper iron ore.
Only China benefits because it gets cheaper iron ore.

Both countries benefit because each gets goods they need at lower costs.
Both countries benefit because each gets goods they need at lower costs.

Neither country benefits because trade creates unfair competition.
Neither country benefits because trade creates unfair competition.
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Answer 1

Both countries benefit because each gets goods they need at lower costs.

Explanation: Voluntary trade lets Australia specialize in iron ore (where it has an advantage) and China specialize in manufactured goods, so each country obtains other goods more cheaply than producing them itself, raising overall welfare.