In the figure below, 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. After Canada engages in free trade, it will:
A. produce at point S1 and consume at point C1.
B. produce at point S1 and consume at point C0.
C. produce and consume points not labeled in the graph.
D. produce and consume at point C0.
Answer: A
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