_____________ occurs when high-cost domestic producers are replaced by low-cost producers.____________ occurs when lower-cost external suppliers are replaced by higher-cost suppliers within the free trade area.
A) Trade synergy; Trade qualification
B) Trade qualification; Trade synergy
C) Trade creation; Trade diversion
D) Trade diversion; Trade creation
E) Trade growth; Trade manipulation

Question

Quizplus · Accepted Answer

Trade creation occurs when high-cost domestic producers are replaced by low-cost producers within a free trade area, leading to more efficient production and consumption. Trade diversion happens when lower-cost external suppliers are replaced by higher-cost suppliers within the free trade area, which can lead to less efficient economic outcomes.

_____________ Occurs When High-Cost Domestic Producers Are Replaced by Low-Cost