In terms of static economic analysis, if a customs union results in a small amount of trade creation relative to trade diversion, world welfare
A) increases.
B) decreases.
C) either increases or decreases.
D) neither increases nor decreases.

Question

Quizplus · Accepted Answer

If a customs union results in a small amount of trade creation relative to trade diversion, it means that the losses due to trade diversion outweigh the gains from trade creation. As a result, world welfare decreases.

In Terms of Static Economic Analysis, If a Customs Union