Multiple Choice
(Table: U.S. Demand for and Supply of Widgets) The United States can import widgets from China at $4 each and from Mexico at $5 each. The United States imposes a tariff of $2 on each of its widget imports. Is the United States better off or worse off in its trade in widgets following the free-trade agreement with Mexico? 
A) It is better off because trade creation gains exceed trade diversion losses.
B) It is worse off because trade diversion losses exceed trade creation gains.
C) It is worse off because trade creation losses exceed trade diversion gains.
D) It is better off because trade diversion gains exceed trade creation losses.
Correct Answer:
Verified
Correct Answer:
Verified
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