Which economic arrangement allows the free movement of factors of production such as land, labor, capital, and enterprise between member countries?

• A. Free Trade Area
• B. Economic Union
• C. Common Market
• D. Monetary Union

Answer: (C)

The main idea being tested is which level of regional integration explicitly allows the free movement of land, labor, capital, and enterprise across member countries. A Common Market fits this description because, beyond removing barriers to trade in goods and services, it enables the factors of production to move freely between members. Workers can take jobs in other countries, capital can flow to where it’s most productive, and firms can establish operations across borders with minimal restrictions, creating a seamless allocation of resources.

Other arrangements don’t fully match that feature. A Free Trade Area eliminates tariffs among members but keeps barriers to factor movement, so people and capital aren’t guaranteed the same cross-border freedom. A Monetary Union centers on sharing a currency and coordinating monetary policy, which doesn’t by itself ensure free movement of labor or capital. An Economic Union involves deeper policy harmonization and integration, including some monetary and fiscal coordination, but the explicit emphasis on unrestricted movement of factors is the hallmark of a Common Market.