Trade diversion occurs when:
A)low-cost producers within the free trade area replace high-cost domestic producers.
B)lower-cost suppliers replace higher-cost external suppliers within the free trade area.
C)higher-cost external suppliers replace lower-cost domestic producers within the free trade area.
D)higher-cost suppliers replace lower-cost external suppliers within the free trade area.

Question

Quizplus · Accepted Answer

Trade diversion occurs when higher-cost suppliers within a free trade area replace lower-cost external suppliers due to preferential treatment, leading to less efficient trade outcomes.

Trade Diversion Occurs When