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5. Suppose Canada has a 20% tariff on the import of carpets, and Canada currently imports this product from India at a with-tariff price of

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5. Suppose Canada has a 20% tariff on the import of carpets, and Canada currently imports this product from India at a with-tariff price of $22. The with-tari price of identical carpets from the United States is $24. Now suppose a free-trade agreement with the U.S. eliminates the tariff and so the no-tarif price from the US. is $20. Canada now purchases carpets from the US. This is an example of A) dumping. B) trade diversion. C) a countervailing duty. D} trade creation. E) specialization

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