costs of RTAs

• What is trade diversion?

  Trade diversion occurs when countries reallocate trade to partners in their agreement.
• How can trade diversion affect global efficiency?

  It may worsen global efficiency.
• What type of unemployment do some domestic industries experience?

  Structural unemployment
• What are some negative consequences of production mentioned in the study material?

  Increased negative externalities, resource depletion, and environmental damage
• What challenge might firms face when transitioning to a monetary union?

  Firms may find it hard to adjust/change their menu prices
• What do member countries lose when they join a monetary union?

  They lose their ability to set interest rates and control the supply of money
• What is a significant consequence of joining a monetary union mentioned in the study material?

  Loss of sovereignty