A Customs Union Is a Free Trade Area with a Common

question 16

True/False

A customs union is a free trade area with a common external tariff.

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Definitions:

Public Good

A good that is non-excludable and non-rivalrous, meaning individuals cannot be effectively excluded from its use, and one individual's use does not reduce availability to others.

Asymmetric Information

A situation where one party to a market transaction has much more information about a product or service than the other. The result may be an under- or overallocation of resources.

Inefficient Outcomes

Situations where resources are not allocated optimally, resulting in potential losses in economic welfare.

Allocative Efficiency

A state of resource allocation where it is impossible to make any one individual better off without making someone else worse off, often achieved when marginal cost equals marginal benefit.