When a rich country that has absolute advantages in all products begins trading with a poor country the wages in:
A) the rich country will go down and the wages in the poor country will go up.
B) both countries will go up.
C) both countries will go down.
D) the rich country will go up and the wages in the poor country will go down.

Question

Quizplus · Accepted Answer

When a rich country with absolute advantages in all products trades with a poor country, the poor country will specialize in producing goods with lower production costs and export those goods to the rich country. As a result, the poor country's economy will grow, leading to an increase in wages. Meanwhile, the rich country will be able to access cheaper goods and materials from the poor country, which will result in lower production costs and higher profits for domestic industries. This will lead to a growth in the economy, resulting in an increase in wages for workers. Therefore, both countries will benefit from trade and experience an increase in wages.

When a Rich Country That Has Absolute Advantages in All