Suppose Canada Has a 20% Tariff on the Import of Carpets,and

Multiple Choice

Suppose Canada has a 20% tariff on the import of carpets,and Canada currently imports this product from India at a with-tariff price of $22.The with-tariff price of identical carpets from the United States is $24.Now suppose a free-trade agreement with the U.S.eliminates the tariff and so the no-tariff price from the U.S.is $20.Canada now purchases carpets from the U.S.This is an example of

A) dumping.
B) trade diversion.
C) a countervailing duty.
D) trade creation.
E) specialization.