The net loss from trade diversion for a country is likely to be smaller if:
A)the county's import demand is more elastic.
B)the country's tariff rate on the product is higher.
C)the good can be produced at relatively lower cost in the bloc-partners than in the outside world.
D)the bloc partner's export price is closer to the tariff-inclusive price for imports from countries outside the bloc.

Question

Quizplus · Accepted Answer

If the good can be produced at a relatively lower cost in the bloc-partners than in the outside world, the net loss from trade diversion is smaller because the cost savings from cheaper imports within the bloc can offset the losses from diverting trade away from more efficient global producers.

The Net Loss from Trade Diversion for a Country Is