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The following table describes the production possibilities of two cities in the country of Baseballia Pairs...

The following table describes the production possibilities of two cities in the country of Baseballia Pairs of Red Socks per Worker per Hour Pairs of White Socks per Worker per Hour Boston Chicago 5 4 Without trade, the price of a pair of white socks (in terms of red socks) in Boston is, is of red socks, and in Chicago it of red socks. has an absolute advantage in the production of red socks, and has an absolute advantage in the production of white socks. has a comparative advantage in the production of red socks, and has a comparative advantage in the production of white socks. If the cities trade with each other, Boston will export socks, and Chicago will export socks. The price of white socks can be expressed in terms of red socks. The highest price at which white socks can be traded that would make both cities better off is off is of red socks per pair of white socks, and the lowest price that makes both cities better of red socks per pair of white socks.

The following table describes the production possibilities of two cities in the country of Baseballia Pairs of Red Socks per Worker per Hour Pairs of White Socks per Worker per Hour Boston Chicago 5 4 Without trade, the price of a pair of white socks (in terms of red socks) in Boston is, is of red socks, and in Chicago it of red socks. has an absolute advantage in the production of red socks, and has an absolute advantage in the production of white socks. has a comparative advantage in the production of red socks, and has a comparative advantage in the production of white socks. If the cities trade with each other, Boston will export socks, and Chicago will export socks. The price of white socks can be expressed in terms of red socks. The highest price at which white socks can be traded that would make both cities better off is off is of red socks per pair of white socks, and the lowest price that makes both cities better of red socks per pair of white socks.
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Answer #1 ✔ Recommended Answer

a) Price of white socks in Boston in terms of red socks is 3/6 or 0.5 and in Chicago it is 5 /4 or 1.25.

b) Chicago has an absolute advantage in the production of Red Socks and Boston have a comparative advantage in the production of White socks.

c) As Boston has to give up less i.e. the price paid by Boston in terms of Red socks is less they have an comparative advantage in making white socks. Boston have comparative advantage in red socks and Chicago in white socks.

d) So, Boston will export red and Chicago will export white socks.

e) it will be 0.5 or 3/6 in the first blank and 5/4 or 1.25 in the second.

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