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25 May, 10:19

Factor endowments refer to the extent to which free trade impacts the wealth of a country. True or False

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  1. 25 May, 10:40
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    The statement given in the question if False.

    Explanation:

    Based on the Heckscher-Ohlin model of international trade, factor endowment refers to the availability of various factors or inputs of production in respective countries used in the production of goods and services which eventually determines the patterns and flow of international trade between respective countries in the world. Hence, factor endowments of respective nations is mainly associated with the potential or the capacity of the countries to produce certain goods and services given the availability or accessibility of various productive resources, inputs or endowments. Now factor endowments across all the countries in the world is not evidently as some countries have abundant availability of some of the resources which are scarce in some other countries and vise versa. Therefore, the differences in factor endowment across various countries basically determine the productive potential or capacity of those countries and the resultant trade patterns, flows and trends among those countries.
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