The formation of a regional trading bloc results in trade creation if
A) inefficient domestic production is replaced by more efficient production from another member country.
B) inefficient domestic production is replaced by more efficient production from a nonmember country.
C) member countries import more but export less to nonmember countries.
D) member countries export less but import more from nonmember countries.

Question

Quizplus · Accepted Answer

Trade creation occurs when a regional trading bloc leads to the replacement of inefficient domestic production with more efficient production from another member country. This results in increased trade within the bloc and economic benefits for member countries. Choices B, C, and D all describe scenarios that do not necessarily result in trade creation within the trading bloc.

The Formation of a Regional Trading Bloc Results in Trade