The Trade-Creation Effect Refers To

question 31

Multiple Choice

The trade-creation effect refers to:

• A)a reduction in economic efficiency as a result of a preferential trade agreement.
• B)a production shift to a higher-cost producer as a result of a preferential trade agreement.
• C)the outcome of a preferential trade agreement that allows a country to obtain goods at a lower cost than is available at home.
• D)diversion of production from a country that has comparative advantage.
• E)a production shift to a country that does not have comparative advantage.

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Definitions:

Excess Supply

A situation where the quantity of a good supplied is greater than the quantity demanded at the current price.

Good Y

A non-specific term used in economic models to represent a product or service, usually contrasted with another good, referred to as "Good X."

Fertilizer Prices

The cost for fertilizers, which are chemical or natural substances added to soil to improve its fertility and the growth of plants.

Supply Of

Refers to the total amount of a product or service that is available for purchase at any given price point in a given market.