_____ Occurs When Higher-Cost External Producers Are Replaced by Lower-Cost

question 16

Multiple Choice

_____ occurs when higher-cost external producers are replaced by lower-cost external producers within the free trade area?

• A) Trade creation
• B) Strategic pricing
• C) Value creation
• D) Trade diversion
• E) Protectionism

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Definitions:

Chase Demand

A production strategy where production levels are adjusted to match demand fluctuations, minimizing inventory levels but potentially increasing operational costs.

Subcontracting Cost

Expenses incurred when a company hires external suppliers or service providers to perform certain tasks or functions that are part of the production process.

Stockout Cost

The financial impact associated with running out of stock, including lost sales, backorder processing, and customer dissatisfaction.