As a Result of the Formation of a Free Trade

question 107

Multiple Choice

As a result of the formation of a free trade area between six member countries in the Pacific Rim, one member country found that its lower-cost external suppliers were replaced by higher-cost suppliers within the free trade area. This is an example of

• A) trade creation.
• B) strategic pricing.
• C) synergy.
• D) trade diversion.
• E) protectionism.

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Definitions:

Assets

Resources controlled by a business as a result of past events and from which future economic benefits are expected to flow to the business.

Liabilities

Financial obligations or debts that a company owes to others, which must be settled over time.

Revenue

The total amount of money earned by a business from its operational activities, before any expenses are subtracted.

Equipment Account

An account on a company's balance sheet that reports the value of the equipment that the company owns.