2.2 India and Pakistan each produce only wheat and rice. Domestic prices are given in the following table: India Pakistan Wheat 400 INR/kg 600 PKR/kg Rice 700 INR/kg 900 PKR/kg If 1 Indian Rupee (INR) = 1 Pakistani Rupee (PKR),

a. Which country has an absolute advantage in the production of wheat? Rice?

b. Which country has a comparative advantage in the production of wheat? Rice?

c. If India and Pakistan were the only two countries in trade, what adjustments would you predict assuming exchange rates are freely determined by the laws of supply and demand?