We consider three countries: A, B, and RoW ("Rest of the World"). A imports good 1 from B and RoW; B imports good 2 from A and RoW; RoW imports good 3 from A and B. We suppose that A and B agree to form a customs union. In terms of surplus, in which case(s) would it be prefererable to form a free trade area instead of a customs union?

Question

Accepted Answer

A would gain and B would lose by removing unilaterally their tariff on RoW

Accepted Answer

A would lose and B would gain by removing unilaterally their tariff on RoW

Answer

Both A and B would gain in terms of total surplus by removing unilaterally their tariff on RoW.

Answer

Both A and B would lose in terms of total surplus by removing unilaterally their tariff on RoW.

Answer

I don't know

Crowdly

We consider three countries: A, B, and RoW ("Rest of the World"). A imports good...

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