By joining NAFTA,the United States,Canada,and Mexico would find their short-run welfare decreasing due to the:

Question

Quizplus · Accepted Answer

The correct choice is the trade diversion effect, where trade is diverted away from more efficient producers outside the bloc and towards less efficient producers within it. This may lead to higher prices and lower overall welfare in the short run. The other options (economies of scale, business investment, and trade creation effects) would have positive effects on welfare in the short run.

By Joining NAFTA,the United States,Canada,and Mexico Would Find Their Short-Run