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
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 5 2 Chicago 4 3 Without trade, the price of a pair of white socks (in terms of red socks) in Boston is v of red socks, and in Chicago it is v of red socks. v has an absolute advantage in the production of red socks, and v has an absolute advantage in the production of white socks. V has a comparative advantage in the production of red socks, and V has a comparative advantage in the production of white socks. If the cities trade with each other, Boston will export v socks, and Chicago will export V 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 v of red socks per pair of white socks, and the lowest price that makes both cities better off is v of red socks per pair of white socks
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