Multiple choice

Which of the following assumptions is not related to the partial equilibrium approach of the Theory of Customs Union?

  1. There are two countries, called home country and partner country, which form the customs union.

  2. There is no other type of restriction.

  3. The customs union imposes a common external tariff.

  4. There is perfect competition in factor markets.

  5. There is balanced trade whereby exports equal imports in the home country.
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D Correct answer
Explanation

No, because the partial equilibrium approach to the theory of Customs Union is based on the assumption of perfect competition in commodity as well as factor market.

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