CA Foundation · Business Economics · International Trade
Which of the following is the main feature that distinguishes a common market from a customs union?
A common market goes beyond a customs union by permitting free movement of factors of production, such as labour and capital, between member countries. Free internal trade in goods and a common external tariff are already present in a customs union, so they do not distinguish it.
- AFree movement of factors of production such as labour and capital among membersCorrect
- BRemoval of tariffs on goods traded among members
- CAdoption of a common external tariff
- DPreferential tariff cuts on a limited list of goods
Explanation
A common market has all features of a customs union (free internal trade, common external tariff) and additionally allows free movement of labour and capital. Hence options 2 and 3 are shared with a customs union and do not distinguish it. Option 4 describes a preferential trading arrangement.
Did you get it right without looking?
One question tells you little. A timed set on International Trade shows your real accuracy, how long you take and where you lose marks.
More International Trade questions
- When a small country imposes an import tariff on a good, which of the following is the most likely effect on its domestic market?
- When a small open economy imposes an import tariff on a good, what is the usual effect on the domestic price and domestic production of that…
- India's export price index rises from 100 to 120 while its import price index rises from 100 to 150 over a period. The net barter terms of t…
- In India, 1 unit of labour produces 10 kg of rice or 20 metres of cloth. In Bangladesh, 1 unit of labour produces 6 kg of rice or 18 metres …
- The 'infant industry' argument for protection is best described as:
- Compared with an import tariff, an import quota that restricts imports to the same quantity differs mainly in that: