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Question

The table below shows the production possibilities of two countries,

Saudi Arabia, and USA, of two goods, oil, and beef, given a fixed amount of resources. Oil. Beef Saudi. 500. 500 U.S.A. 500. 200 a. Which country has the absolute advantage in oil, and which has the absolute advantage in beef? b. Calculate Saudi's opportunity cost of oil in terms of beef c. If the two countries were to specialize and trade with one another, which country would import oil? d. Assume the countries decide to specialize and trade and settled on a trading price of 1.5 oil per beef. Explain why the U.S.A would experience gains from trade.

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Subject: Business, Economics

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