The following table shows the total production that can be produced by two countries at 100 workers. Corn production (bushels) 350 Countries Oil production (barrels) Saudi Arabia 500 United States 300 450 a) Which country has an absolute advantage in the production of oil and corn? b) Calculate the opportunity cost of producing one barrel of oil and one bushel of corn in each country. c) According to the principle of comparative advantage, which country should specialize in producing of oil and corn?

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Comparative Advantage and Absolute Advantage Analysis

The theory of absolute advantage was given by Adam Smith in the year 1776.