According to the factor price equalization theorem, the ________ factor should oppose free. trade policies in any given country?
Correct answer: B. scarce
- A. abundant
- B. scarce
- C. neither
- D. can't tell without more information
Explanation
Trade tends to benefit a country’s abundant factor and reduce the relative return to its scarce factor under the factor-price-equalization framework. Owners of the scarce factor therefore tend to oppose freer trade.
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Individual consumers, firms and markets are examined through demand and supply, elasticity, consumer choice, production, costs, revenue and the determination of prices and output. The topic also covers market structures such as perfect competition, monopoly and oligopoly, plus market failure, externalities and the distinction between microeconomic decisions and economy-wide outcomes.
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