The factor-proportions theory identifies the source of comparative advantage as:
A) differences in relative factor endowments between countries.
B) similarities in tastes.
C) identical production methods.
D) similar factor endowments.
E) differences in tastes.

Question

Quizplus · Accepted Answer

The factor-proportions theory, also known as the Heckscher-Ohlin theory, suggests that countries will export goods that make intensive use of the factors of production (land, labor, capital) that they have in abundance. Therefore, the source of comparative advantage according to this theory is differences in relative factor endowments between countries.

The Factor-Proportions Theory Identifies the Source of Comparative Advantage As