Suppose that apples from Japan face a 15% tariff in Germany and a 20% tariff in Italy,while Germany and Italy maintain free trade between each other.Germany and Italy are therefore part of a(n):
A)Free trade area
B)Customs union
C)common market
D)economic union

Question

Quizplus · Accepted Answer

A free trade area is a group of countries that have agreed to eliminate tariffs, quotas, and other barriers to trade between each other while maintaining their own independent trade policies with countries outside the group. In this scenario, Germany and Italy have free trade between each other, but maintain different tariff rates for apples from Japan. This indicates that they are part of a free trade area rather than a customs union, common market, or economic union, which would involve greater levels of trade integration and coordination.

Suppose That Apples from Japan Face a 15% Tariff in Germany