When a member of custom union,replaces one of its high cost production processes with a production process that uses lower cost imports from a member nation,this leads to:
A)trade creation
B)trade diversion
C)the generation of economies of scale
D)dynamic trade effect

Question

Quizplus · Accepted Answer

When a member of a customs union replaces a high-cost production process with a lower cost import from another member nation, it leads to trade creation as it increases the demand for imported goods and lowers the costs for consumers within the union. This, in turn, increases trade within the union and stimulates economic growth.

When a Member of Custom Union,replaces One of Its High