Trade Creation Occurs When Imports from a Low-Cost Supplier Outside

question 103

True/False

Trade creation occurs when imports from a low-cost supplier outside of a customs union are replaced by purchases from a higher-cost supplier within the union.

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Definitions:

Domestic Industry

Industries that produce goods and services within a country’s borders, as opposed to foreign or international markets.

Quota

Limit set on the amounts of particular products that can be imported.

Dumping

Selling products abroad at prices below production costs or below typical prices in the home market to capture market share from domestic competitors.