The following production possibilities schedule shows the quantities of wheat and rice that can be produced in Canada and India with one unit of equivalent resources.
TABLE 32-2
-Refer to Table 32-2.To achieve the potential gains from international trade,

Question

The following production possibilities schedule shows the quantities of wheat and rice that can be produced in Canada and India with one unit of equivalent resources.
  TABLE 32-2
-Refer to Table 32-2.To achieve the potential gains from international trade,

Quizplus · Accepted Answer

As per the production possibilities schedule given in Table 32-2, India has a comparative advantage in producing rice as it can produce 4 units of rice with one unit of resources compared to Canada's 2 units. On the other hand, Canada has a comparative advantage in producing wheat as it can produce 3 units of wheat with one unit of resources compared to India's 1 unit. Therefore, to achieve potential gains from international trade, India should export rice to Canada and import Canadian wheat. By doing so, India can specialize in producing rice and export the surplus to Canada, which can specialize in producing wheat and export the surplus to India. This will lead to an increase in the overall output and efficiency of both countries.

The Following Production Possibilities Schedule Shows the Quantities of Wheat