A country that is relatively labor-abundant and relatively land-scarce opens to international trade.As a result,it finds that wages _____ and rents _____.

Question

Quizplus · Accepted Answer

In a country that is relatively labor-abundant and relatively land-scarce, the increase in international trade will lead to an increase in the demand for labor-intensive goods that the country can produce more efficiently. This increase in demand for labor will, in turn, increase wages as workers become more valuable and employers need to pay more to attract them.

At the same time, the country's comparative disadvantage in land-intensive production will cause a decrease in rents for landowners as demand for these goods decreases. Therefore, in this scenario, wages increase while rents decrease.

A Country That Is Relatively Labor-Abundant and Relatively Land-Scarce Opens