“The United States has more oil in Alaska than there is oil in Kuwait. Therefore, the United States should stop importing oil.” Evaluate this statement using economic analysis.

What will be an ideal response?


While the statement is based on absolute advantage, the decision on importing oil depends on comparative advantage. The United States may not have a comparative advantage in oil compared to Kuwait if the United States would have a productive alternative to oil production, such as fishing or tourism.

Economics

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