Absolute Advantage in Oil Production

Which nation has an absolute advantage in producing oil?

1. The United States
2. Saudi Arabia

Answer:

Neither

Because it takes both nations the same amount of time to produce oil, neither has an absolute advantage in producing this good. Absolute advantage refers to the ability of a country to produce a good more efficiently than another country. It is an economic concept that is used to refer to a party's superior production capability.

In this scenario, the United States and Saudi Arabia both take 2 hours to produce a barrel of oil. Since both countries take the same amount of time to produce oil, neither nation has an absolute advantage in producing oil.

Absolute advantage specifically refers to the ability to produce a certain good or service at lower cost (i.e., more efficiently) than another party. In this case, both countries have equal efficiency in producing oil, so none of them has an absolute advantage in producing oil.