Describe Customs Unions and Explain Why MERCOSUR Is an Example

question 10

Essay

Describe customs unions and explain why MERCOSUR is an example of a customs union. How can customs unions potentially reduce global free trade?

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Definitions:

Economic Profits

Profits exceeding the opportunity costs of a venture or investment, accounting for both explicit and implicit costs.

Normal Profits

The level of profit necessary to keep a firm in an industry, equating to the opportunity cost of capital and entrepreneurship.

Marginal Cost

The financial commitment needed for producing an extra unit of a good or service.

Marginal Revenue

The addition to total revenue resulting from the sale of one more unit of a product or service.