Indus and Sril are part of a customs union; and Bang is not part of it$.$ The customs union imposes an ad valorem tariff of $50\%$ on bicycles imported from outside the customs union. Let us assume the cost of production of bicycles in Indus, Sril and Bang are $100$$$,90$$ and$70$$$.$

How will the trade in bicycles change with Bang joining the customs union? 

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Introduction A customs union involves a group of countries that have agreed to eliminate barriers to trade among themselves and impose a common extern... View the full answer