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Buy the lowest-priced shirts

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US consumers always buy the lowest-priced shirts and the US has a $3 tariff on shirt imports (we're looking at the US as the market/ as the importer). Then, the US and Mexico form a free Trade Area which does not include Thailand. For all the following, tell if trade diversion, trade creation, both, or neither occur. Explain your answers (show why TD or TC or both or neither happen in each case.

A. It cost $10 to produce shirts in the US, $6 in Mexico and $4 in Thailand.

b. It cost $10 to produce shirts in the US, $9 in Mexico and 4 in Thailand.

C. It cost $10 to produce shirts in the US, $3 in Mexico and $4 in Thailand.

Reference no: EM131285951

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