5. Comparative Advantage The following table describes the...

5. Comparative Advantage

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 3 6

Chicago 5 4

Without trade, the price of a pair of white socks (in terms of red socks) in Boston is ______Q1__________    of red socks, and in Chicago it is _______Q2_______    of red socks.

 _____Q3_____________   has an absolute advantage in the production of red socks, and _______Q4_________   has an absolute advantage in the production of white socks.

_______Q5___________-    has a comparative advantage in the production of red socks, and ________Q6_____________   has a comparative advantage in the production of white socks.

If the cities trade with each other, Boston will export ________Q7_________    socks, and Chicago will export ______Q8________    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 ________Q9________    of red socks per pair of white socks, and the lowest price that makes both cities better off is ______Q10_________   of red socks per pair of white socks.

Q1 (1/2, 2, 4/5, 11/4)

Q2 (1/2, 2, 4/5, 11/4)

Q3 ( Boston, Chicago)

Q4 ( Boston, Chicago)

Q5 ( Boston, Chicago)

Q6 ( Boston, Chicago)

Q7 (Red, White)

Q8 (Red, White)

Q9 (1/2, 2, 4/5, 11/4)

Q10 (1/2, 2, 4/5, 11/4)