6. The following table describes the production possibilities of two cities:

Red Sweaters per Worker per Hour Blue Sweaters per Worker per Hour Montreal 3

3 Toronto 2

1

a. Without trade, what is the price of blue sweaters (in terms of red sweaters) in Montreal? What is the price in Toronto?

b. Which city has an absolute advantage in the production of each colour of sweater? Which city has a comparative advantage in the production of each colour of sweater?

c. If the cities trade with each other, which colour of sweater will each export?

d. What is the range of prices at which trade can occur?