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

Question

Quizplus · Accepted Answer

A temporary factor-price differential is a difference in the prices of factors of production (such as labor or capital) that is not based on intrinsic differences in the factors themselves, but rather on factors such as fluctuations in demand or supply. This type of differential is temporary and tends to be eliminated in the long run as resources are reallocated from declining to growing industries.

A Temporary Factor- Price Differential Is One Which