Trade Diversion Occurs When Higher-Cost External Producers Are Replaced by Lower-Cost

question 4

True/False

Trade diversion occurs when higher-cost external producers are replaced by lower-cost external producers within the free trade area.

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Definitions:

International Monetary Fund

An international organization designed to foster global monetary cooperation, secure financial stability, and facilitate international trade.

Global Capitalist Economy

An economic system characterized by private or corporate ownership of capital goods, operating globally and influenced by market forces.

Communist Countries

Nations that practice or claim to practice a system of government based on the collective ownership of property and the organization of labor for the common advantage of all its members.

North Atlantic Treaty Organization

An intergovernmental military alliance between 30 North American and European countries.