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)