In the following figure, AB is the production-possibility curve of Canada. The line PQ shows the price ratio of one bushel of wheat/bale of cotton. The international price ratio is 0.25 bushels of wheat/bale of cotton as shown by the line RS. I1 and I2 are two of the community indifference curves of Canada. Which of the following can be inferred from this figure?
A. Canada has a comparative advantage in the production of wheat.
B. Canada has an absolute advantage in the production of both goods.
C. Canada has an absolute disadvantage in the production of both goods.
D. Canada has a comparative advantage in the production of cotton.
Answer: A
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