Question

The factor-price equalization theory and transportation costs Which of the following statements about the factor-price equalization theory and the effects of transportation costs are correct? Check all that apply. Differences in transport costs do not affect the comparative advantage of trading nations. Free trade, in the absence of transportation costs or other barriers to trade, tends to equalize product prices and factor prices. Transportation costs prevent product prices from equalizing. Workers in trading nations always earn the same wages, and capital earns the same interest income.

Answer 1

B and C

Step-by-step explanation:

The correct statements about the factor-price equalization and the effects of transportation costs are:

1. Free trade, in the absence of transportation costs or other barriers to trade, tends to equalize product prices and factor prices.
2. Transportation costs prevent product prices from equalizing.