Imagine a war fought using biological weapons that eliminate human labor but leave physical capital intact. Compared to the pre-war period, what changes would you expect in the equilibrium wages and rental prices after the conflict?

Explanation

When biological weapons reduce the labor force but leave capital untouched, the scarcity of labor causes wages to rise due to higher demand relative to supply. Meanwhile, the abundance of capital relative to labor lowers the rental rates on capital. Hence, wages go up and rental rates fall after the war.