Factor price equalization can occur even if factors of production are not mobile internationally.

Question

Quizplus · Accepted Answer

Factor price equalization can occur through trade, as specialization and comparative advantage lead to countries exporting goods that use their abundant factors of production, and importing goods that use their scarce factors. This results in convergence of factor prices across countries, even without actual physical movement of factors of production.

Factor Price Equalization Can Occur Even If Factors of Production