Country X forms a customs union with country Y.
X then ceases to produce its own cars and instead imports cars from Y. Country Y diverts some of its car exports to X from country Z.
How is this likely to affect car prices in X and Z?

[Table mapping country X and country Z car prices for options A, B, C, D]

Question

Country X forms a customs union with country Y.
X then ceases to produce its own cars and instead imports cars from Y. Country Y diverts some of its car exports to X from country Z.
How is this likely to affect car prices in X and Z?

[Table mapping country X and country Z car prices for options A, B, C, D]

Oracle Prep · Accepted Answer

The correct answer is B: decrease increase

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