Country X becomes part of a customs union with country Y and is going to abolish the tariff on its imports of good M from country Y. Under which conditions would trade creation in country X be the smallest?
- Aexisting size of country X’s tariff on imports of good M large; price elasticity of demand for good M in country X –0.8
- Bexisting size of country X’s tariff large; price elasticity –1.4
- Cexisting size of country X’s tariff small; price elasticity –0.8
- Dexisting size of country X’s tariff small; price elasticity –1.4