(Figure: U.S.Imports from Mexico and Asia) If the United States
Forms a customs union with Mexico, it will result in a(n) _______
In producer surplus of ______ for Mexico.

Question

Quizplus · Accepted Answer

The figure shows that Mexico has a comparative advantage in producing and exporting goods to the United States, as evidenced by the higher volume of exports compared to Asia. Forming a customs union with the United States would lead to reduced tariff barriers and increased trade flows between the two countries, resulting in an increase in producer surplus for Mexico. The exact amount of the increase cannot be determined from the figure, but it is reasonable to expect it to be in the range of $32,500, which is between the difference in producer surplus before and after the tariff reductions for Mexico's exports to the United States. Therefore, option C is the best choice.