A customs union that results in a sizable amount of __________ would be beneficial to global welfare.
A) trade creation
B) trade diversion
C) trade restrictions
D) trade diversification

Question

Quizplus · Accepted Answer

Trade creation refers to the increase in trade between member countries due to reduced barriers to trade within the customs union. This leads to more efficient allocation of resources and higher levels of welfare for all participating countries. Therefore, a customs union that results in trade creation would be beneficial to global welfare. Trade diversion, on the other hand, refers to the shift in trade from a more efficient producer outside the customs union to a less efficient producer within the union due to the imposition of trade barriers on non-member countries. This results in a loss of welfare for the global economy. Trade restrictions and trade diversification are not relevant to the question as they do not specifically relate to the effects of a customs union on global welfare.

A Customs Union That Results in a Sizable Amount of __________