Suppose the Country of Ceria and Lithinia Imposed Tariffs on Imports

question 18

Multiple Choice

Suppose the country of Ceria and Lithinia imposed tariffs on imports from all countries,and then they set up a free trade area,scrapping all trade barriers between themselves but maintaining tariffs on imports from the rest of the world.Now,Ceria begins to import sugar from Lithinia.However,Ceria had previously been importing sugar from another country,Cadnia,which produced sugar more cheaply than Ceria or Lithinia.This is an example of

• A)trade creation.
• B)strategic pricing.
• C)synergy.
• D)trade diversion.
• E)protectionism.

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Definitions:

Straight-Line Method

The straight-line method is a technique for calculating depreciation of an asset by evenly spreading its cost over its expected useful life.

Semiannual Interest

Semiannual interest refers to the interest payment made two times a year on a loan or bond.

Present Value

The present valuation of a future financial sum or cash flow series, factoring in a specific return rate.

Compound Interest

Interest earned on both the initial principal and the accumulated interest from previous periods on a deposit or loan.