Wages generally:
A)are higher in laborabundant countries than in capital abundant countries.
B)are lower in laborabundant countries than in capital abundant countries.
C)are the same in both laborabundant and capital abundant countries.
D)have no relationship to labor abundance.

Question

Wages generally:
A)are higher in labor­abundant countries than in capital­ abundant countries.
B)are lower in labor­abundant countries than in capital­ abundant countries.
C)are the same in both labor­abundant and capital­ abundant countries.
D)have no relationship to labor abundance.

Quizplus · Accepted Answer

According to the Heckscher-Ohlin model, wages are lower in labor-abundant countries than in capital-abundant countries. This is because in labor-abundant countries, there is a greater supply of labor relative to capital, which puts downward pressure on wages. In capital-abundant countries, the opposite is true, and wages are higher due to a greater supply of capital relative to labor.

Wages Generally