Assume Saudi Arabia and the United States face the production possibilities for oil and cars shown in the accompanying table.

Saudi Arabia United States Quantity of oil

(millions of barrels)

Quantity of cars (millions)

Quantity of oil

(millions of barrels)

Quantity of cars (millions)

0 4 0 10.0 200 3 100 7.5 400 2 200 5.0 600 1 300 2.5 800 0 400 0

a. What is the opportunity cost of producing a car in Saudi Arabia? In the United States? What is the opportunity cost of producing a barrel of oil in Saudi Arabia? In the United States?

b. Which country has the comparative advantage in producing oil? In producing cars?

c. Suppose that in autarky, Saudi Arabia produces 200 million barrels of oil and 3 million cars; similarly, that the United States produces 300 million barrels of oil and 2.5 million cars. Without trade, can Saudi Arabia produce more oil and more cars? Without trade, can the United States produce more oil and more cars?