When does trade creation occur in the context of economic integration?

Show Answers

When a nation transitions from self-sufficiency to engaging in free tradeWhen joining a customs union lowers trading expenses by harmonizing regulationsWhen economic integration causes production to shift to a member country with lower costsWhen economic integration leads to production moving from a low-cost non-member to a higher-cost member country

Explanation

Trade creation happens when economic integration prompts production to relocate to a member country that offers lower production costs, thereby increasing efficiency within the integrated area.