Final answer:
The question concerns the relative price of goods in different locations without trade, exemplified by the price of white socks in terms of red socks in Boston and Chicago. It illustrates concepts such as opportunity cost, comparative advantage, and the benefits of specialization and trade in economics.
Step-by-step explanation:
The student's question is about the relative price of white socks in terms of red socks in different locations (Boston and Chicago) without trade. This is a question related to the concept of opportunity cost and the benefits of trade. Without trade, goods can have different relative prices in different locations due to varying local availability and demand.
In the example provided, the price in Boston for a pair of white socks is 2 pairs of red socks, whereas in Chicago, it's only 4/5 pair of red socks. This discrepancy in prices shows a potential opportunity for arbitrage, where an individual or a company could profit by buying goods in a market where they're cheap and selling them where they're expensive, provided that trade is allowed and transaction costs are not prohibitively high.
The broader context of trading products like T-shirts and movies, or the U.S. shifting production towards its comparative advantage, illustrates fundamental principles of economics such as comparative and absolute advantage and how they influence global trade patterns, allowing countries to consume more by specializing and engaging in trade rather than being self-sufficient.