If two countries are very different in relative factor abundance, then empirically support for which of the following would less likely?
A) the Factor Price Equalization Theorem
B) the Heckscher-Ohlin Theorem
C) the Law of One Price
D) the Law of Demand
E) the Gravity Theorem

Question

Quizplus · Accepted Answer

The Factor Price Equalization Theorem states that trade between two countries with different factor endowments will result in equalization of factor prices in the long run. However, if two countries are very different in relative factor abundance, such as one country having abundant labor and another having abundant capital, support for the Factor Price Equalization Theorem would be less likely. This is because the differences in factor endowments would lead to persistent differences in factor prices. Therefore, option A is less likely to be supported empirically in such a scenario.

If Two Countries Are Very Different in Relative Factor Abundance