Factor-price equalization means that:
A) trade will have a tendency to equalize the prices of factors of production among countries that trade.
B) international trade theory has nothing to do with reality.
C) international trade will tend to only equalize the price of labor among countries.
D) international trade has no influence on the prices of factors of production in countries that trade.
E) trade does not influence factor prices.

Question

Quizplus · Accepted Answer

Factor-price equalization theorem suggests that free trade will lead to the equalization of the prices for factors of production (like labor and capital) among trading countries, assuming perfect competition and other ideal conditions.

Factor-Price Equalization Means That