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 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.

All the blanks are filled with explanation below.

Explanation:

Solution:

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.

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

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: (Note: Bold words are blanks filled)

1. The price of pair of white socks (in terms of red socks) in Boston is 0.5 pairs of red socks of red socks, and in Chicago it is 1.25 red socks of red socks.

2.Chicago has an absolute advantage in the production of red socks, and Boston has an absolute advantage in the production of white socks.

3. Chicago has a comparative advantage in the production of red socks, and Boston has a comparative advantage in the production of white socks.

4. If the cities trade with each other, Boston will export white socks, and Chicago will export red socks.

5. 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 1.25 of red socks per pair of white socks, and the lowest price that makes both cities better off is 0.5 of red socks per pair of white socks.