Relative to a regional trade agreement, a multilateral trade agreement may be more beneficial to global welfare in that it entails
A) less trade creation.
B) less trade diversion.
C) more trade diversion.
D) more trade consumption.

Question

Quizplus · Accepted Answer

A multilateral trade agreement involves the reduction of trade barriers between multiple countries rather than just within a region, leading to greater competition and efficiency in global markets. This results in less trade diversion, where lower-cost goods from outside the region are replaced by higher-cost goods from within the region. This can lead to higher prices and lower consumer welfare in the region. Therefore, a multilateral trade agreement can be more beneficial to global welfare as it promotes free trade and competition on a global scale, creating a more efficient and competitive market.

Relative to a Regional Trade Agreement, a Multilateral Trade Agreement