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October 25, 2014

Homework Help: Economics

Posted by G on Friday, May 16, 2008 at 10:55am.

I am getting thrown off by absolute advantage:

Boston:
Red Socks per worker per hour 3
White Socks per worker per hour 3

Chicago:
Red Socks per worker per hour 2
White Socks per worker per hour 1

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

This is my answer to this question:

Boston:
3 White Socks=3 Red Socks
1 White Sock=1 Red Sock

Chicago:
1 White sock=2 Red Socks
.5 White Sock=1 Red Sock

The next question is what is what I am having trouble with:

B)Which city has an absolute advantage in the production of each color sock? Whick city has a comparative advantage it ehe productions of each color sock?

This is my answer:

Boston has the absolute advantage in the production of white socks. Neither city has an absolute advantage in the production of red socks.

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

I am not sure I am answering correctly.

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