Which of the following refers to trade diversion? A. The change in the trade pat

Question

Which of the following refers to trade diversion?

A. The change in the trade pattern such that the good which was formerly imported is now exported as the government subsidizes its production

B. The amount of the imported goods that is substituted with domestically produced goods

C. The volume of trade that is redirected from low-cost exporters to higher-cost trade bloc member countrie

D. The volume of trade that is redirected from low-cost exporters to higher cost domestic firms when the domestic government imposes import restrictions

Explanation / Answer

C. The volume of trade that is redirected from low-cost exporters to higher-cost trade bloc member country

Low-cost exporters are more efficient in the production of exporting good. Hence they export it to less efficient member country where it is of the high cost.

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