Suppose Canada Has a 20% Tariff on the Import of Carpets,and

question 91

Multiple Choice

Suppose Canada has a 20% tariff on the import of carpets,and Canada currently imports this product from India at a with-tariff price of $22.The with-tariff price of identical carpets from the United States is $24.Now suppose a free-trade agreement with the U.S.eliminates the tariff and so the no-tariff price from the U.S.is $20.Canada now purchases carpets from the U.S.This is an example of

• A)dumping.
• B)trade diversion.
• C)a countervailing duty.
• D)trade creation.
• E)specialization.

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