_____ occurs when higher-cost external producers are replaced by lower-cost external producers within the free trade area?
A) Trade creation
B) Strategic pricing
C) Value creation
D) Trade diversion
E) Protectionism

Question

Quizplus · Accepted Answer

Trade creation occurs when higher-cost external producers are replaced by lower-cost external produces within the free trade area. This leads to increased efficiency and lower prices for consumers within the free trade area. Trade diversion, on the other hand, occurs when lower-cost external producers are replaced by higher-cost internal producers within the free trade area, which can lead to higher prices for consumers. Strategic pricing and value creation are related concepts but are not directly related to the scenario described. Protectionism is a term used to describe policies that restrict trade, and is not applicable in this context.

_____ Occurs When Higher-Cost External Producers Are Replaced by Lower-Cost