Factor endowment theory is a proposition that nations will develop comparative advantage based on their locally abundant factors.

Question

Quizplus · Accepted Answer

Factor endowment theory suggests that countries will specialize in producing goods and services that are based on their locally abundant factors, which enables them to take advantage of economies of scale and produce goods more efficiently than other countries. This theory is based on the assumption that factors of production such as land, labor, and capital are not evenly distributed across the world, and countries can gain a competitive advantage by utilizing their abundant factors of production. This statement accurately represents the concept of factor endowment theory, which suggests that countries will specialize in producing goods that make use of their abundant factors of production, such as natural resources, capital, or skilled labor. By doing so, they can achieve economies of scale and become more competitive in global trade.

Factor Endowment Theory Is a Proposition That Nations Will Develop