In the Figure Given Below AB Is the Production-Possibility Curve

question 29

Multiple Choice

In the figure given below AB is the production-possibility curve of Canada. In the absence of trade, the price ratio is 1 bushel of wheat/bale of cotton as shown by the line PQ. The international price ratio is 0.25 bushels of wheat/bale of cotton as shown by the line RS. I₁ and I₂ are the pre-trade and the post trade community indifference curves of Canada respectively. Which of the following can be inferred from this figure?

• A)Canada has a comparative advantage in the production of wheat.
• B)Canada has a comparative advantage in the production of cotton.
• C)Canada has an absolute disadvantage in the production of both the goods.
• D)Canada has absolute advantage in the production of both the goods.

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Definitions:

Production Department

The division within an organization responsible for manufacturing its products or services, involving the transformation of raw materials into finished goods.

Reward Systems

Structures and policies within an organization designed to incentivize and recognize employee performance and achievements.

Personal Goal Setting

The practice of identifying specific, measurable, achievable, relevant, and time-bound objectives that one wishes to accomplish within a certain timeframe.

Constructive Thought Patterns

Cognitive processes that are positive, productive, and conducive to finding solutions and fostering personal growth.