Answer to Question #300304 in Microeconomics for grace

Question

Boston chicago

Pairs of Red socks per Worker per Hour

3 2

Pairs of White socks per Worker per Hour

3 1

a. Without trade, what is the price of white socks (in terms of red socks) in Boston? What is the price in Chicago?

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

c. If the cities trade with each other, which color sock will each export?

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

Answer 1

A) Boston $=1$

Chicago$=2$

B) Boston has absolute advantage in producing white socks while Chicago has comparative advantage in producing red socks.

C) Boston will export white socks while Chicago will export red socks.