Question 1

Which of the following represents the stage where economic integration is most complete?

Accepted Answer

A)   Economic union
B)   Customs union
C)   Monetary union
D)   Common marketE) C) and D)
F) B) and C)

Question 2

The North American Free-Trade Agreement was most strongly opposed by U.S.:

Accepted Answer

A)   Electronics manufacturers
B)   Labor unions
C)   Commercial banks
D)   Engineering companiesE) All of the above
F) B) and D)

Question 3

In the short run,Mexico would realize overall welfare gains from becoming a member of the North American Free Trade Agreement if the resulting diseconomies of scale effect more than offset the competition effect.

Accepted Answer

A) True 
 B)False

Question 4

The highest stage of economic integration is a monetary union.

Accepted Answer

A) True 
 B)False

Question 5

Which nation is not a member of the North American Free Trade Association?

Accepted Answer

A)   Canada
B)   Greenland
C)   Mexico
D)   United StatesE) C) and D)
F) A) and D)

Question 6

The European Union protects its agricultural producers from import competition by the use of tariff rates that vary directly with world prices.

Accepted Answer

A) True 
 B)False

Question 7

It is generally agreed that completing the common market stage of integration for the European Union contributed to overall welfare losses due to trade diversion exceeding trade creation.

Accepted Answer

A) True 
 B)False

Question 8

Figure 8.1 depicts the supply and demand schedules of calculators for Greece, a "small" country that is unable to affect the world price. Greece's supply and demand schedules of calculators are respectively depicted by SG and DG. Assume that Greece imports calculators from either Germany or France. Suppose Germany is the world's low-cost producer who can supply calculators to Greece at $20 per unit, while France can supply calculators at $30 per unit.
Figure 8.1. Effects of a Customs Union
 
-Consider Figure 8.1.With free trade,Greece imports:

Accepted Answer

A)   3 calculators from France
B)   5 calculators from France
C)   3 calculators from Germany
D)   5 calculators from GermanyE) B) and D)
F) None of the above

Question 9

If the United States and Canada abolish all tariffs on each other's goods and implement a common tariff on goods imported from other countries,there occurs a (an) :

Accepted Answer

A)   Free-trade area
B)   Customs union
C)   Common market
D)   Economic unionE) All of the above
F) A) and C)

Question 10

In the former Soviet Union,production of capital goods was determined by the free market while consumer-goods production was determined by central planning.

Accepted Answer

A) True 
 B)False

Question 11

A static welfare effect resulting from the formation of the European Union would be:

Accepted Answer

A)   Economies of scale
B)   Trade diversion
C)   Investment incentives
D)   Increased competitionE) B) and C)
F) C) and D)

Question 12

Suppose that Canada has domestic firms that could supply its entire market for radios at a price of $50,while U.S.firms could supply radios at $40 and Mexico at $30.Suppose that Canada initially has a 50 percent tariff on imports of radios and then forms a free trade area with Mexico.As a result,Canada realizes:

Accepted Answer

A)   Trade creation, no trade diversion, and overall welfare gains
B)   Trade creation, no trade diversion, and overall welfare losses
C)   Trade diversion, no trade creation, and potential overall welfare losses
D)   Trade diversion, trade creation, and potential overall welfare gainsE) B) and C)
F) All of the above

Question 13

Which organization of nations permits free trade among its members in industrial goods,while each member maintains freedom in its trade policies toward non-member countries?

Accepted Answer

A)   European Union
B)   Benelux
C)   Council for Mutual Economic Assistance
D)   North American Free Trade AssociationE) C) and D)
F) B) and D)

Question 14

In a centrally-planned economy:

Accepted Answer

A)   Commercial decisions are made by independent buyers and sellers acting in their own interest
B)   Market-determined prices are used for allocating scarce resources
C)   Prices play a rationing role so that the availability of goods is made consistent with buyer preferences and income
D)   Government controls prices and output of goods bought and sold, with minimal recognition given to considerations of efficiencyE) B) and C)
F) A) and B)

Question 15

Trade creation would occur if Canada and the United States form a free-trade area,and Canadians then import less steel from the United States while importing more steel from Japan.

Accepted Answer

A) True 
 B)False

Question 16

Which form of economic integration occurs when participating countries abolish tariffs on trade among themselves,establish a common tariff on imports from nonmembers,and permit free movement of capital and labor within the organization?

Accepted Answer

A)   Free trade area
B)   Economic union
C)   Common market
D)   Monetary unionE) B) and D)
F) All of the above

Question 17

When the formation of a free trade area results in the reduction of trade with nonmember nations in favor of member countries,____ occurs.

Accepted Answer

A)   Trade devaluation
B)   Trade revaluation
C)   Trade destruction
D)   Trade diversionE) B) and C)
F) C) and D)

Question 18

Figure 8.1 depicts the supply and demand schedules of calculators for Greece, a "small" country that is unable to affect the world price. Greece's supply and demand schedules of calculators are respectively depicted by SG and DG. Assume that Greece imports calculators from either Germany or France. Suppose Germany is the world's low-cost producer who can supply calculators to Greece at $20 per unit, while France can supply calculators at $30 per unit.
Figure 8.1. Effects of a Customs Union
 
-According to Figure 8.1,the formation of a Greece/Germany customs union would result in:

Accepted Answer

A)   $20 of trade diversion
B)   $40 of trade diversion
C)   $20 of trade creation
D)   $40 of trade creationE) C) and D)
F) All of the above

Question 19

By 1992 the European Union had become a full-fledged:

Accepted Answer

A)   Economic union
B)   Monetary union
C)   Common market
D)   Fiscal unionE) A) and B)
F) None of the above

Question 20

If the United Kingdom and Italy eliminate all tariffs on each other's goods and all restrictions to factor movements between them,and implement a uniform system of import restrictions against the rest of the world,these countries have formed a common market.

Accepted Answer

A) True 
 B)False

Exam 8: Regional Trading Arrangements

Correct Answer
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Correct Answer
verified

Which form of economic integration occurs when participating countries abolish tariffs on trade among themselves,establish a common tariff on imports from nonmembers,and permit free movement of capital and labor within the organization?

Correct Answer
verified

When the formation of a free trade area results in the reduction of trade with nonmember nations in favor of member countries,____ occurs.

Correct Answer
verified

The North American Free-Trade Agreement was most strongly opposed by U.S.:

Correct Answer
verified

Which nation is not a member of the North American Free Trade Association?

Correct Answer
verified

The highest stage of economic integration is a monetary union.

Correct Answer
verified

In the former Soviet Union,production of capital goods was determined by the free market while consumer-goods production was determined by central planning.

Correct Answer
verified

By 1992 the European Union had become a full-fledged:

Correct Answer
verified

Trade creation would occur if Canada and the United States form a free-trade area,and Canadians then import less steel from the United States while importing more steel from Japan.

Correct Answer
verified

Correct Answer
verified

In a centrally-planned economy:

Correct Answer
verified

Which of the following represents the stage where economic integration is most complete?

Correct Answer
verified

The European Union protects its agricultural producers from import competition by the use of tariff rates that vary directly with world prices.

Correct Answer
verified

If the United Kingdom and Italy eliminate all tariffs on each other's goods and all restrictions to factor movements between them,and implement a uniform system of import restrictions against the rest of the world,these countries have formed a common market.

Correct Answer
verified

In the short run,Mexico would realize overall welfare gains from becoming a member of the North American Free Trade Agreement if the resulting diseconomies of scale effect more than offset the competition effect.

Correct Answer
verified

It is generally agreed that completing the common market stage of integration for the European Union contributed to overall welfare losses due to trade diversion exceeding trade creation.

Correct Answer
verified

Which organization of nations permits free trade among its members in industrial goods,while each member maintains freedom in its trade policies toward non-member countries?

Correct Answer
verified

A static welfare effect resulting from the formation of the European Union would be:

Correct Answer
verified

If the United States and Canada abolish all tariffs on each other's goods and implement a common tariff on goods imported from other countries,there occurs a (an) :

Correct Answer
verified

Exam 8: Regional Trading Arrangements

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which form of economic integration occurs when participating countries abolish tariffs on trade among themselves,establish a common tariff on imports from nonmembers,and permit free movement of capital and labor within the organization?

Correct AnswerverifiedShow Answer

When the formation of a free trade area results in the reduction of trade with nonmember nations in favor of member countries,____ occurs.

Correct AnswerverifiedShow Answer

The North American Free-Trade Agreement was most strongly opposed by U.S.:

Correct AnswerverifiedShow Answer

Which nation is not a member of the North American Free Trade Association?

Correct AnswerverifiedShow Answer

The highest stage of economic integration is a monetary union.

Correct AnswerverifiedShow Answer

In the former Soviet Union,production of capital goods was determined by the free market while consumer-goods production was determined by central planning.

Correct AnswerverifiedShow Answer

By 1992 the European Union had become a full-fledged:

Correct AnswerverifiedShow Answer

Trade creation would occur if Canada and the United States form a free-trade area,and Canadians then import less steel from the United States while importing more steel from Japan.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

In a centrally-planned economy:

Correct AnswerverifiedShow Answer

Which of the following represents the stage where economic integration is most complete?

Correct AnswerverifiedShow Answer

The European Union protects its agricultural producers from import competition by the use of tariff rates that vary directly with world prices.

Correct AnswerverifiedShow Answer

If the United Kingdom and Italy eliminate all tariffs on each other's goods and all restrictions to factor movements between them,and implement a uniform system of import restrictions against the rest of the world,these countries have formed a common market.

Correct AnswerverifiedShow Answer

In the short run,Mexico would realize overall welfare gains from becoming a member of the North American Free Trade Agreement if the resulting diseconomies of scale effect more than offset the competition effect.

Correct AnswerverifiedShow Answer

It is generally agreed that completing the common market stage of integration for the European Union contributed to overall welfare losses due to trade diversion exceeding trade creation.

Correct AnswerverifiedShow Answer

Which organization of nations permits free trade among its members in industrial goods,while each member maintains freedom in its trade policies toward non-member countries?

Correct AnswerverifiedShow Answer

A static welfare effect resulting from the formation of the European Union would be:

Correct AnswerverifiedShow Answer

If the United States and Canada abolish all tariffs on each other's goods and implement a common tariff on goods imported from other countries,there occurs a (an) :

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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