Suppose that a rare virus infects and kills a significant percentage of the population. Assuming that land and labor are complements in a farming production function, what would happen to the wages earned by workers and the rents earned by landowners?
A)Both wages and rents would increase.
B)Both wages and rents would decrease.
C)Wages would increase, and rents would decrease.
D)Wages would decrease, and rents would increase.

Question

Quizplus · Accepted Answer

If a significant percentage of the population is killed by a virus, the labor force would decrease. In a scenario where land and labor are complements, the decrease in labor makes land less productive, reducing the demand for land. Consequently, rents for landowners would decrease. However, the reduced labor force would also mean that the remaining workers are in shorter supply, leading to an increase in wages due to the increased demand for the now scarcer labor.

Suppose That a Rare Virus Infects and Kills a Significant