An Example of How Trade Diversion Results in a Suboptimal

question 30

Multiple Choice

An example of how trade diversion results in a suboptimal situation is auto parts trade between Mexico and the United States. After NAFTA:

• A) Mexico decreased its sales of auto parts to the United States.
• B) the United States purchased more auto parts from Mexico because of the elimination of tariffs and reduced purchases from East Asia, which was the lowest-cost producer.
• C) the United States brought a complaint against Mexico for low-quality auto parts.
• D) the United States purchased fewer auto parts from Mexico because of the elimination of tariffs and increased purchases from East Asia, which was the lowest-cost producer.

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Definitions:

Learning Late

The process of acquiring new skills or knowledge at an age considered older than the typical developmental timeframe.

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Demographic Shift

A change in the statistical characteristics of a population over time, such as age, race, or gender distribution.

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