Suppose Country X Currently Does Not Produce Widgets

question 97

Multiple Choice

Suppose country X currently does not produce widgets. Instead, it imports widgets from country Z. Then country X establishes a regional trade agreement with country Y. Following the formation of the regional trade agreement, it imports widgets from country Y. What has occurred?

• A) There is trade diversion and a welfare loss for country X.
• B) There is trade creation and a welfare loss for country Y.
• C) There is trade diversion and a welfare gain for country X.
• D) There is trade creation and a welfare gain for country Y.

---

Definitions:

Heart Defect

A physical abnormality present in the heart from birth, affecting its structure, function, or both.

Unusual Facial Features

Distinctive facial characteristics that significantly deviate from the cultural norm.

Placental Development

The process by which the placenta forms and matures to support fetal development during pregnancy.

Smoking Cigarettes

The act of inhaling and exhaling the smoke produced by burning tobacco in rolled paper.