12. If trade is conducted in vertically differentiated products, and starting from a situation in which Greece and Germany are members of a Customs Union (CU), then the entry of Bulgaria into the CU will:

(a) reduce Greek exports to Germany if Bulgaria is the lowest-cost producer of low-quality varieties (among the three countries)

(b) reduce Greek exports to Germany if Bulgaria is the lowest-cost producer of low-quality varieties, and Germany is the lowest-cost producer of high-quality varieties

(c) increase Greek exports to Bulgaria

(d) both (b) and (c)

(e) none of the above