Question

Free trade agreements can potentially do all of the following except

shift trade away from the lowest cost producer

cause a change in the price of consumption

trade expands for the country that enters into the arrangement

trade contracts for the country that enters into the arrangement

Answer 1

Ans. Free trade agreements can potentially do all of the following except:

Trade contracts for the country that enters into the arrangement.

The Free Trade Agreement reduces the barriers of import and export between the nations in a pact. Under a free trade policy, goods and services can be bought and sold between the nations with little to no government intervention such as quotas, tariffs, subsidies or prohibition to inhibit their exchange. Thus country getting into a free trade agreement experiences increase in trade.