When the United States,Canada,and Mexico Form a Free Trade Area,and

question 15

Multiple Choice

When the United States,Canada,and Mexico form a free trade area,and Mexico begins importing a product from Canada rather than from the lowest cost world producer.

• A) Trade diversion occurs
• B) Trade creation occurs
• C) World welfare rises
• D) World welfare falls to zero

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Definitions:

Direct Materials

Raw materials that are directly traceable to the manufacturing of a product and constitute a significant portion of the production cost.

Equipment Depreciation

Allocation of the cost of tangible assets over their useful lives, reflecting the decrease in the value of equipment over time.

Performance Budget Report

A document that compares actual financial performance to budgeted amounts, often highlighting efficiencies or areas that need improvement.

Investment Centers

Sections of a company treated as separate business units, responsible for their profit and investment.