In autarky, wages generally:
A) are higher in the labor-abundant country than in the capital-abundant country.
B) are lower in the labor-abundant country than in the capital-abundant country.
C) are the same in the labor-abundant and the capital-abundant countries.
D) have no relationship to labor abundance.

Question

Quizplus · Accepted Answer

In autarky, wages tend to be lower in the labor-abundant country than in the capital-abundant country. This is because in a labor-abundant country, there is an excess supply of labor relative to the demand for labor, which drives down wages. In contrast, in a capital-abundant country, capital is relatively abundant and labor is scarce, so there is a higher demand for labor, which pushes up wages.

In Autarky, Wages Generally