The Trade-Creation Effect Refers To

The trade-creation effect refers to:

A) a reduction in economic efficiency as a result of a preferential trade agreement.
B) a production shift to a higher-cost producer as a result of a preferential trade agreement.
C) the outcome of a preferential trade agreement that allows a country to obtain goods at a lower cost than is available at home.
D) diversion of production from a country that has comparative advantage.
E) a production shift to a country that does not have comparative advantage.

Correct Answer:

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