question 42

Consider the early-19th century United States. There are two relevant factors of production at the time: labor and land. They are complements. There are two regions, each with their own respective factor markets: East and West. Labor can most between the two, relatively costlessly. Obviously, land can't move. The Louisiana Purchase of 1803 doubled stock of land in the West. All else equal, employment in the East and wages in the East O rose; rose O rose; fell O fell; fell fell; rose