What would a country experience if it entered a customs union?

When a country enters a customs union, it typically experiences increased trade with more efficient producers, which is the correct understanding of the effects of such trade agreements. A customs union is an arrangement where member countries agree to eliminate tariffs and other trade barriers among themselves while adopting a common external tariff against non-member countries.

As a result of this arrangement, member countries can trade more freely with each other, allowing for the specialization of production among the participating nations based on comparative advantages. This enables them to benefit from economies of scale, leading to a more efficient allocation of resources. Consequently, consumers in member countries gain access to a greater variety of goods at potentially lower prices, driving trade expansion with those efficient producers within the union.

The other options do not align with the typical outcomes of joining a customs union. For example, higher trade barriers with member countries contradicts the foundational goal of a customs union, which is to promote intra-union trade. A customs union also typically facilitates movement rather than restricts it, as member countries remove internal barriers to trade. Finally, while decreased foreign investments could occur under specific circumstances, it is not a general outcome of customs unions, as they typically make member countries more attractive for trade, which can, in turn, enhance foreign