Suppose that Mexico and Canada form a free trade area.Mexicans then decrease auto manufacturing and increase imports of autos from Canada, while the Canadians decrease computer production and import more computers from Mexico.This is an example of

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Quizplus · Accepted Answer

This is an example of trade creation because the free trade area leads to increased trade between the two countries, with each country specializing in producing what they have a comparative advantage in and importing what they don't. This results in increased efficiency and lower prices for consumers.

Suppose That Mexico and Canada Form a Free Trade Area