An Example of How Trade Diversion Results in a Suboptimal

question 14

Multiple Choice

An example of how trade diversion results in a suboptimal
Situation is auto parts trade between Mexico and the United
States.After NAFTA:

• A)Mexico decreased its sales of auto parts to the United States.
• B)the United States purchased more auto parts from Mexico due to the elimination of tariffs and reduced purchases from East
• Asia, which was the lowest­cost producer.
• C)the United States brought a complaint against Mexico for low­ quality auto parts.
• D)the United States purchased fewer auto parts from Mexico due to the elimination of tariffs and increased purchases from East
• Asia, which was the lowest­cost producer.

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Definitions:

Manufacturer

An entity that produces finished goods from raw materials on a large scale, using machinery, labor, and production processes.

Seasoning Packets

Pre-measured spices and herbs combinations sold in small packets used to enhance the flavor of dishes without the need for separate seasoning ingredients.

Demand

The consumer's desire and willingness to pay a price for a specific good or service.

Buyer-supplier Relationship

The dynamic interaction between companies that buy goods and services and those that sell them.