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- Subject
- Regional Trading Arrangementseconomics-mcqs › regional-trading-arrangements
- Published
- 30 May 2019
- Last updated
- 28 May 2026
When does trade diversion occur in the context of economic integration?
Multiple choice question for Regional Trading Arrangements. Select an option, then review the explanation below.
Explanation
Trade diversion happens when economic integration leads to a change in sourcing from a lower-cost non-member country to a higher-cost member country, which may increase overall costs despite preferential trade agreements.
More Regional Trading Arrangements MCQs
Practice related questions from the same subject.
- 1.Which of the following is NOT a common criticism of the North American Free Trade Agreement (NAFTA)?
- 2.For Country X entering a customs union, under which conditions is trade creation more likely to surpass trade diversion?
- 3.Which of the following represents a beneficial and proactive impact of economic integration?
- 4.What term describes the increase in trade resulting from the establishment of a regional trading bloc that raises trade volumes beyond previous levels?
- 5.What term describes the situation when a regional trade agreement causes a decrease in trade with countries outside the group, benefiting member nations instead?