Which of the following is true of trade diversion?
A) It increases the purchasing power of consumers.
B) It increases the level of trade between nonmember nations.
C) It generally increases the prices of products in a nation.
D) It guarantees consumers a wider selection of goods.

Question

Quizplus · Accepted Answer

Trade diversion occurs when a member country of a trade agreement switches from buying cheaper imports from non-member countries to more expensive imports from within the trade agreement. This generally raises prices for consumers in the member country, as they are forced to buy more expensive goods from within the agreement instead of cheaper goods from non-member countries.

Which of the Following Is True of Trade Diversion