A free-trade equilibrium exists in which Australia exports food and imports clothing. Australian engineers now invent a new process for producing clothing at a lower cost. This process cannot be used in the rest of the world.

i. What is the effect on Australias production-possibility curve?

ii. What is the effect on Australias willingness to trade? (Assume that Australia remains an importer of clothing.) Briefly discuss one reason to support your answer.

iii. Assuming that the change in Australia is large enough to affect international prices, will the equilibrium international price of clothing rise or will it fall? Briefly explain.