Two eastern European countries formed a free trade agreement. As a result, one of the countries that used to produce its own plastic bottles at a higher cost now imports them from the other country at a lower cost. This is an example ofa. political unionb. dumping. c. retaliatory trade action. d. trade creation.

Question

Cristopher Meyer

Business

3 October, 00:40

Two eastern European countries formed a free trade agreement. As a result, one of the countries that used to produce its own plastic bottles at a higher cost now imports them from the other country at a lower cost. This is an example ofa. political unionb. dumping. c. retaliatory trade action. d. trade creation.

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Tripp Malone · Answer 1

Trade creation

Explanation:

Trade creation is the process where there is increase in economics welfare as a result of joining a free trade area for example a customs Union.

Consumption experiences a shift from high cost producers to low cost producers causing expansion in trade.

In the given instance due to formation of free trade agreement, high cost plastic production is now replaced with low cost import of plastics from the other company.

There is a shift from high cost producers to low cost producers as a result of trade agreement between the two nations.