Assume that the United States and India enjoy constant opportunity costs and the production possibilities shown in the table. Peanuts (millions of pounds) Pecans(millions of pounds)

India 10 1

United States 5 10

a) Which country has an absolute advantage in pounds of peanuts?

b) Use the table to calculate the opportunity costs for each good and each country.

c) In which good would the United States specialize, and what range of terms of trade would be acceptable?

d) Draw a PPC for each country, placing pounds of peanuts on the y-axis and pecans on the x-axis.

e) Choose any acceptable terms of trade to plot and label two points on the PPC. Explain how both countries are able to consume beyond their individual PPCs.

Step-by-step explanation