Other things equal, would the formation of a customs union with many members be more likely or less likely to improve welfare for a given member country than the formation of a customs union with only a few members? Why or why not? Other things equal, would the formation of a customs union be more likely or less likely to enhance welfare for a given member country if that country had very high preunion tariffs than if it had very low preunion tariffs? Why or why not?

Question

Quizplus · Accepted Answer

The Answer is The formation of a customs union with many members would be more likely to improve welfare for a given member country compared to the formation of a customs union with only a few members. This is because a larger customs union would provide a larger market for the member country's goods and services, leading to increased trade and economic growth. Additionally, a larger customs union would also provide more opportunities for specialization and economies of scale, leading to lower production costs and increased efficiency.

On the other hand, the formation of a customs union would be more likely to enhance welfare for a given member country if that country had very high preunion tariffs compared to if it had very low preunion tariffs. This is because high preunion tariffs would imply greater trade barriers and higher costs for imported goods, so the removal of these barriers through the formation of a customs union would lead to greater welfare gains. In contrast, a country with very low preunion tariffs would already have relatively open trade policies, so the welfare gains from joining a customs union would be less significant.

Other Things Equal, Would the Formation of a Customs Union