Question

The rationale for NAFTA is ________.

to create competition for the European Union

geographic proximity and trading importance

the tremendous size of the Canadian economy in comparison to the Mexican economy

similar-sized economies

Assume that U.S. companies are importing the same product from Mexico and Taiwan. The United States enters into an FTA with Mexico but not with Taiwan. Consequently, the United States begins to import more goods from Mexico (due to lower tariffs) than from Taiwan, even though the Mexican products may not be any better or cheaper. This is an example of ________.

trade diversion

trade creation

trade internalization

trade specialization

Costa Rica applied the concepts of the diamond of national advantage to help transform its economy by ________.

concentrating on the development of nontradable goods

following import substitution policies

looking globally, rather than just domestically, to develop favorable conditions

building domestic demand for the products it wished to produce

Answer 1

Answer 1.

geographic proximity and trading importance

reason- NAFTA is an economic trading group which separates the member countries from other countries. Mexico, United States and Canada have Trade agreement called NAFTA.

Answer 2. Trade diversion

reason- Trade is diverted from Taiwan to Mexico even though both places have similar goods.

Answer 3. looking globally to develop favorable conditions

reason- Costa Rica will start to trade with the world based on comparative advantage. This will help cota Rica look global.