A temporary factor-price differential is one which
A)will tend to be eliminated in the long run.
B)will hamper the reallocation of resources from declining to growing industries.
C)derives from intrinsic differences in the factors themselves.
D)will reflect a permanent state of disequilibrium.
E)is seldom self-eliminating.

Question

Quizplus · Accepted Answer

A temporary factor-price differential is a short-term difference in prices of factors of production, which are likely to be eliminated in the long run due to market forces such as supply and demand, competition, and equilibrium. Therefore, the best answer is A - temporary factor-price differentials will tend to be eliminated in the long run.

A Temporary Factor-Price Differential Is One Which