The customs union could lead to losses for the home country if:
A)the other country in the customs union is the most efficient producer.
B)the other country in the customs unions is not the most efficient producer.
C)there are other countries outside the customs union that are inefficient.
D)all countries are efficient producers.

Question

Quizplus · Accepted Answer

If the other country in the customs union is not the most efficient producer, the home country may import goods from this less efficient partner instead of more efficient producers outside the union, leading to trade diversion and potential losses.

The Customs Union Could Lead to Losses for the Home