A Trade-Diverting Customs Union

question 11

Multiple Choice

A trade-diverting customs union:

• A)increases the welfare of member and nonmember nations
• B)reduces the welfare of member and nonmember nations
• C)increases the welfare of member nations but reduces that of nonmembers
• D)reduces the welfare of nonmembers and may increase or reduce that of members

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Definitions:

Political

Relating to the government, public affairs, or the administration of public policy.

Trade War

A situation in which countries try to damage each other’s trade, typically by the imposition of tariff and quota restrictions.

Tariffs

Taxes imposed by a government on goods and services imported from other countries.

Quotas

Set limits or targets, usually pertaining to sales, production, or imports and exports, that a company or government aims to achieve.