Answered: The following table describes the…

Essentials of Economics (MindTap Course List)

8th Edition

ISBN:9781337091992

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter7: Consumers, Producers, And The Efficiency Of Markets

Section: Chapter Questions

Problem 8PA

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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 Hour
Boston 3 3
Chicago 2 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?

Definition Video Definition Ability of a country to produce more output with a given level of input or to produce the same level of output with a lower level of input as compared to the other countries. For example, if Country A produces 200 units with the help of 10 units of labor, and Country B produces 300 units with 10 units of labor, Country A has an absolute advantage in the production of the good. Video

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