Match List-I with List-II relating to benefits and cost of economic integration and identify the code representing correct matching.
List – I List – II
a. Trade creation i. Movement of production and resources in opposite directions.
b. Trade diversion ii. Become active when a member country does not augment export but simply shifts its imports from low cost source to high cost source.
c. Trade deflection iii. Shifting the locus of production from high cost to low cost centre within the union.
d. Polarisation forces iv. Goods produced in a third country entering a free trade area through a member country having lower tariff.
Codes :

Question

Match List-I with List-II relating to benefits and cost of economic integration and identify the code representing correct matching.

List – I	List – II
a. Trade creation	i. Movement of production and resources in opposite directions.
b. Trade diversion	ii. Become active when a member country does not augment export but simply shifts its imports from low cost source to high cost source.
c. Trade deflection	iii. Shifting the locus of production from high cost to low cost centre within the union.
d. Polarisation forces	iv. Goods produced in a third country entering a free trade area through a member country having lower tariff.

Codes :

Prepp Team · Accepted Answer

Economic Integration: Concept Matching

This solution matches key concepts of economic integration (List-I) with their definitions (List-II), focusing on benefits and costs. The matching is based on standard economic principles applied to the provided options.

Matching List-I with List-II

Trade creation (a) matches iii. Shifting the locus of production from high cost to low cost centre within the union.
Explanation: Trade creation occurs when economic integration leads to specialization and the relocation of production to more efficient (lower cost) locations within the union. This increases overall welfare and trade volume.
Trade diversion (b) matches i. Movement of production and resources in opposite directions.
Explanation: Trade diversion happens when imports shift from a cheaper, more efficient non-member country to a costlier member country due to preferential tariffs. This inefficient shift results in suboptimal resource allocation, described here as potentially moving "in opposite directions" relative to economic efficiency.
Trade deflection (c) matches iv. Goods produced in a third country entering a free trade area through a member country having lower tariff.
Reasoning: This describes a situation within a free trade area (FTA) where goods from non-member countries are imported into the member with the lowest external tariff and then re-exported duty-free to other members, circumventing higher external tariffs.
Polarisation forces (d) matches ii. Become active when a member country does not augment export but simply shifts its imports from low cost source to high cost source.
Explanation: While definition ii is unusually phrased and shares similarities with trade diversion, in this context, it is associated with polarization. This suggests that polarization might manifest through symptoms like a failure to increase exports and a tendency towards import diversion, contributing to uneven development and regional disparities within the union.