Suppose Country A and Country B imposed tariffs on imports from all countries,and then they set up a free trade area,scrapping all trade barriers between themselves but maintaining tariffs on imports from the rest of the world.Country A began to import sugar from Country B.Country A had previously been producing sugar at a higher cost.Which of the following has occurred?
A)Trade creation
B)Trade balancing
C)Trade synergy
D)Trade diversion

Question

Quizplus · Accepted Answer

Trade creation occurs when high-cost domestic producers are replaced by low-cost producers within the free trade area.

Suppose Country a and Country B Imposed Tariffs on Imports