Applying the concepts of opportunity cost

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The learning objectives are applying the concepts of opportunity cost, comparative advantage, and absolute advantage.

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?

Reference no: EM131833435

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