2. For simplicity, assume US and India are the only two countries in the world and Tea and Computers are the only two goods. Suppose that if India produced only Tea, it could make 20 and if it produced only computers, it could produce 40 (or any linear combination of the two in between). US, when it is operating at full employment can produce 25 Tea or 150 Computers (or any linear combo in between).

a. Draw the Production Possibilities Curves for India and US. Just so that we are on doing the same work, let's put Tea on the x-axis and Computers on the y-axis.

b. What is the opportunity cost of producing a Tea in India (in forgone computers)? What is the opportunity cost of producing a Tea in US?

c. Define Comparative Advantage. How is this concept different from "Absolute Advantage"?

d. Which country has a comparative advantage in Tea? Which has a comparative advantage in Computers?