In the factor-proportions theory, international trade is caused by country differences in:
A) technology.
B) tastes and preferences.
C) factor endowments.
D) the degree of competition.
E) transportation costs.

Question

Quizplus · Accepted Answer

The factor-proportions theory, also known as the Heckscher-Ohlin theory, posits that countries trade with each other due to differences in their factor endowments. This means that a country will export goods that require resources (factors of production) that are relatively abundant and import goods that require resources that are relatively scarce.

In the Factor-Proportions Theory, International Trade Is Caused by Country