Membership in a customs union may be either welfare improving or welfare worsening. Illustrate and explain

What will be an ideal response?


It can be welfare worsening if trade diversion is large and trade creation is small. Graphically, this will be more likely when the partner country's price is quite a bit higher than the world price.

Economics

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If there is an increase in income, which of the following is true?

a. The demand for complementary goods decreases. b. The demand for substitute goods decreases. c. The demand for normal goods decreases. d. The demand for normal goods increases. e. The supply for all goods decreases.

Economics

Which of the following observations is true?

a. In the long run, more costs become variable. b. Fixed costs can be completely varied if the time period is sufficient. c. Fixed costs arise when some types of inputs can be bought only in big batches. d. Variable costs arise when inputs have a large productive capacity.

Economics

The price index was 136 in one year and 142 in the next year. What was the inflation rate between the two years?

a. 1.04 percent b. 4.41 percent c. 6.00 percent d. 42.00 percent

Economics

Let supply be given by P = 5Q and demand by P = 19 - 2Q. Suppose we now place a tax of 5 per unit of output on the seller. The new equilibrium price is:

A. 10 B. 7 C. 15 D. 2

Economics