_____ occurs when high-cost domestic producers are replaced by low-cost producers within a free trade area.
A) Value creation
B) Strategic pricing
C) Trade creation
D) Trade diversion
E) Economic exposure

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 overall economic efficiencies and increases in trade. This is different from trade diversion, which occurs when low-cost external producers are replaced by higher-cost internal producers due to trade agreements, leading to overall economic inefficiencies and decreases in trade. Value creation refers to achieving a higher value for a product or service, typically through innovation or customization. Strategic pricing refers to setting prices based on analysis of market competition, rather than simply cost or demand. Economic exposure refers to the risk of financial loss due to fluctuations in exchange rates or other economic factors.

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