Assume that Country A is relatively abundant in labo... - Solved MCQs & Answer

3429EconomicsMedium

Assume that Country A is relatively abundant in labor and Country B is relatively abundant in land Note that wages are the returns to labor and rents are the returns to land According to the factor price equalization theorem, once Country A begins specializing according to comparative advantage and trading with Country B: A. wages and rents should fall in Country A B. wages and rents should rise in Country A C. wages should rise and rents should fall in Country A D. wages should fall and rents should raise in Country A?

Awages and rents should rise in Country A

Bwages should fall and rents should raise in Country A

Cwages should rise and rents should fall in Country A

Correct answer

C. wages should rise and rents should fall in Country A

Explanation

The correct answer is wages should rise and rents should fall in Country A.

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