Trade Creation Occurs When High-Cost Domestic Producers Are Replaced by Low-Cost

question 147

True/False

Trade creation occurs when high-cost domestic producers are replaced by low-cost producers within the free trade area.

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Definitions:

Consumer Surplus

The gap between the price consumers are ready to pay for a good or service and the price they actually incur.

Marginal Revenue

The surplus revenue acquired from the sale of one more unit of a good or service.

Profit Maximizing Output

The level of production at which a firm achieves the highest possible profit, determined by the point where marginal cost equals marginal revenue.

Demand Curve

A graphic representation showing how the quantity demanded of a good or service varies with its price.