Multiple Choice
(Table: Demand and Supply for Gloves) The United States can also
Import gloves from China at $4 per pair and from Mexico at $5 per
Pair.Currently, the United States imposes a specific tariff of $2 on its
Glove imports.Suppose instead that the United States negotiated a
Freetrade agreement with China.Will the United States be better off
Or worse off as a result of its trade in gloves in the freetrade area
With China?
A) It is better off because there are no trade diversion losses.
B) It is worse off because there are no trade creation gains.
C) It is worse off because trade creation gains exceed trade diversion losses.
D) It is better off because trade diversion gains exceed trade creation losses.
Correct Answer:
Verified
Correct Answer:
Verified
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