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.
Correct Answer:
Verified
Correct Answer:
Verified
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