Prepositional phrases do normally modify the noun or noun phrase in front of them. However, this sentence happens to include a rather complicated noun phrase with another preposition "of" and a conjunction "and" linking two nouns in a smaller noun phrase. When there is a complicated noun phrase preceding the preposition (as in this example), it can be unclear whether the prepositional phrase modifies the last noun in the noun phrase or modifies the entire noun phrase as a whole. Usually the context of the rest of the sentence or the surrounding sentences make this clear.
I believe that in this case the prepositional phrase modifies the entire noun phrase "dynamic development of motivation and self-efficacy", but the context of the rest of the sentence would be very helpful. Since "development" is the head of this noun phrase, you can also think of the prepositional phrase as modifying "development". In other words:
Motivation and self-efficacy are found in University EFL learners. How did these things develop in those learners?
To see my reasoning, consider that the prepositional phrase modifies only "self-efficacy". If this were the case, then the sentence would be talking about the dynamic development of motivation in general as well as self-efficacy only in University EFL learners. It seems odd to combine something so general with something so specific, so this seems unlikely.
Alternatively, the prepositional phrase could be modifying only "motivation and self-efficacy", but not the larger noun phrase concerning "development". In this case, there isn't really a difference between these two interpretations. In other words, "the development of A in B" is conceptually equivalent to "the development in B of A".