Question

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 HourBoston 3 6Chicago 5 4Without trade, the price of a pair of white socks (in terms of red socks) in Boston is_______ of red socks, and in Chicago it is ___________ of red socks. _________has an absolute advantage in the production of red socks, and _________ has an absolute advantage in the production of white socks. ___________has a comparative advantage in the production of red socks, and______ has a comparative advantage in the production of white socks. If the cities trade with each other, Boston will export _________socks, and Chicago will export _________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 _________of red socks per pair of white socks, and the lowest price that makes both cities better off is ________of red socks per pair of white socks.

Answer 1

Answer:

1. (0.5 pairs of red socks) and (1.25 pairs of red socks)

2.  (Chicago) and (Boston)

3. (Chicago) and (Boston)

4. (White socks) and (Red Socks)

5. (1.25) and (0.5)

Explanation:

Let's extract the meaning of data from the data given.

Boston produces 3 red socks per worker per hour and 6 white socks per worker per hour

B = 1 worker = 1 hour = produces 3 pairs Red Socks

B = 1 worker = 1 hour = produces 6 pairs white socks

Boston = whites socks in terms of red socks

6 white socks = 3 red socks

white socks = 3/6 red socks

white socks = 0.5 pairs of red socks.  It means, Boston will be producing double the amount of white socks than red socks. Hence, white socks production advantage in Boston.

Chicago = white socks in terms of red socks

4 white socks = 5 red socks

white socks = 5/4 red socks

white socks  = 1.25 red socks , it means Chicago will produce greater amount of red socks than white socks. Hence, red socks production advantage in Chicago.

C = 1 worker = 1 hour = produces 5 pairs Red socks

C = 1 worker = 1 hour = produces 4 pairs white socks

It means in Boston, we have advantage of producing white socks and in Chicago we have advantage of producing red socks.

Fill in the blanks:

1. (0.5 pairs of red socks) and (1.25 pairs of red socks)

2.  (Chicago) and (Boston)

3. (Chicago) and (Boston)

4. (White socks) and (Red Socks)

5. (1.25) and (0.5)