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Which of the following is true of trade diversion? A. It occurs when high-cost domestic producers...

Which of the following is true of trade diversion?

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

B. it is the ultimate goal of most free trade agreements

C. it occurs when higher-cost external producers are replaced by lower-cost external producers within the free trade area

D. it leads to greater economic benefits than trade creation

E. it occurs when lower-cost external suppliers are replaced by higher-cost external suppliers within the free trade area
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Answer #1

"E"

trade diversions occurs when lower cost external supplier are replaced by higher cost external supplier within the free trade area. For example, France is importing clothes from India at a cheap price but after EU it has to be imported form UK but at a price higher than what India was exporting.

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