If two countries are very different in relative factor abundance, then empirical support for which of the following would be less likely?
A) the Factor Price Equalization Theorem
B) the Heckscher-Ohlin Theorem
C) the Law of One Price
D) the Law of Demand
E) the Gravity Theorem

Question

Quizplus · Accepted Answer

The Factor Price Equalization Theorem predicts that trade will cause factor prices to converge across countries. However, if two countries have very different factor endowments, such as one country having abundant labor and the other country having abundant capital, then it is less likely that factor prices will equalize due to trade. Therefore, the empirical support for this theorem would be less likely.

If Two Countries Are Very Different in Relative Factor Abundance