The Net Loss from Trade Diversion for a Country Is

question 35

Multiple Choice

The net loss from trade diversion for a country is likely to be smaller if:

• A)the county's import demand is more elastic.
• B)the country's tariff rate on the product is higher.
• C)the good can be produced at relatively lower cost in the bloc-partners than in the outside world.
• D)the bloc partner's export price is closer to the tariff-inclusive price for imports from countries outside the bloc.

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Definitions:

Predetermined Overhead Rate

A rate used to apply manufacturing overhead costs to products, calculated before the production period based on estimated costs and activity levels.

Variable Overhead

Costs that fluctuate with the level of production activity, such as utilities or raw materials.

Fixed Overhead

Overheads that stay the same no matter the quantity produced or sold, encompassing rent, payroll, and insurance costs.

Fixed Manufacturing Overhead

Ongoing, consistent expenses associated with manufacturing operations, such as rent, salaries, and utilities, regardless of production levels.