Question

Two countries, cadmia and palladia, have formed a free trade agreement. this has resulted in cadmia importing sugar from palladia, which cadmia previously imported from another country at a lower cost. this agreement has led to: dumping. trade diversion. trade creation. retaliatory trade action. a political union.

Answer 1

I believe the answer is: trade diversion.

trade diversion refers to an economic policy to divert a transaction from a more efficient exporter to the less efficient exporter. This diversion could only be possible if both countries involved create some sort of free trade agreement that eliminate the trade barriers or tariff that previously existed.

Answer 2

Based on the given description above regarding the trade activities between the countries Cadmia and Palladia, I can say that this kind of agreement would lead to DUMPING. The answer is the first option. In the international trade, the term Dumping refers to predatory pricing wherein the manufacturer or the supplier supplies products having prices that are lower the cost of production.