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.

---

Definitions:

Reduce Its Value

Reduce Its Value refers to the process or event that diminishes the worth of an asset or commodity.

Rental Income

Earnings received from renting out property or real estate to tenants.

Counteroffer

A response to an offer in negotiations, where the original offer is rejected and a new offer is presented.

Accept The Offer

The act of agreeing to the terms proposed in an offer, thus forming a contractual agreement.