To Avoid Tariffs, a Japanese Firm Moves Its Final Assembly

question 170

Multiple Choice

To avoid tariffs, a Japanese firm moves its final assembly line to Mexico and then ships the final products to Canada. This is an example of

• A) trade deflection.
• B) trade diversion.
• C) protectionism.
• D) rules of origin.

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Definitions:

Economic Profits

The excess of total revenue over total costs, including both implicit and explicit costs.

Implicit Costs

Costs that represent the opportunity cost of using resources that are not directly paid for, such as the owner’s time or the use of assets owned by the firm.

Explicit Costs

Direct, out-of-pocket payments for resources or services used in the production process.

Accounting Profits

Represents the difference between total revenue and explicit costs of a firm.