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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