Question 1

The larger the size and the greater the number of countries in a customs union, the greater the trade diversion effect.

Accepted Answer

A) True 
 B)False

Question 2

In the United States, the proposed North American Free Trade Agreement was generally supported by

Accepted Answer

A)  labor unions. 
B)  electronics firms. 
C)  environmentalists. 
D)  citrus producers. 
A)  labor unions. 
B)  electronics firms. 
C)  environmentalists. 
D)  citrus producers.

Question 3

The European Union's variable levy is essentially a sliding-scale tariff applied to imports of agricultural products.

Accepted Answer

A) True 
 B)False

Question 4

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.Assume Greece levies a per-unit tariff of $20 on imports from both Germany and France. As a result of the $20 tariff, Greece's consumer surplus falls by

Accepted Answer

A)  $90. 
B)  $100. 
C)  $110. 
D)  $120. 
A)  $90. 
B)  $100. 
C)  $110. 
D)  $120.

Question 5

Which organization was founded in 1957 whose objective was to create an economic union among its members?

Accepted Answer

A)  General Agreements on Tariffs and Trade 
B)  Organization of Economic Cooperation and Development 
C)  European Union 
D)  Latin American Free Trade Association 
A)  General Agreements on Tariffs and Trade 
B)  Organization of Economic Cooperation and Development 
C)  European Union 
D)  Latin American Free Trade Association

Question 6

As of 2002, members of the European Monetary Union agreed to replace their currencies with the

Accepted Answer

A)  mark. 
B)  dollar. 
C)  franc. 
D)  euro. 
A)  mark. 
B)  dollar. 
C)  franc. 
D)  euro.

Question 7

Concerning the stages of economic integration, by the early 1990s, the European Union had essentially reached the stage of a (an)

Accepted Answer

A)  free trade area. 
B)  customs union. 
C)  common market. 
D)  economic union. 
A)  free trade area. 
B)  customs union. 
C)  common market. 
D)  economic union.

Question 8

Suppose that Mexico and Canada form a free trade area.The Mexicans then decrease refrigerator manufacturing and increase imports of refrigerators from Canada, while the Canadians decrease auto manufacturing and import more autos from Mexico.This is an example of trade creation.

Accepted Answer

A) True 
 B)False

Question 9

When Mexico became a part of the North American Free Trade Agreement, along with Canada and the United States, it

Accepted Answer

A)  eliminated tariffs against Canada and the United States but maintained them against nonmembers. 
B)  eliminated tariffs against Canada, the United States, and all nonmember countries. 
C)  increased tariffs against Canada, the United States, and all nonmember countries. 
D)  increased tariffs against Canada and the United States but did not change them against nonmember countries. 
A)  eliminated tariffs against Canada and the United States but maintained them against nonmembers. 
B)  eliminated tariffs against Canada, the United States, and all nonmember countries. 
C)  increased tariffs against Canada, the United States, and all nonmember countries. 
D)  increased tariffs against Canada and the United States but did not change them against nonmember countries.

Question 10

U.S.labor unions argued against the North American Free Trade Agreement on the grounds that it would result in U.S.companies relocating in Mexico in order to take advantage of lower wage rates.

Accepted Answer

A) True 
 B)False

Question 11

Regarding stages of economic integration, a customs union

Accepted Answer

A)  goes beyond a free trade area by including a common external tariff. 
B)  falls short of a free trade area by excluding a common external tariff. 
C)  goes beyond a common market by including a common transportation policy. 
D)  goes beyond a common market by including a common agricultural policy. 
A)  goes beyond a free trade area by including a common external tariff. 
B)  falls short of a free trade area by excluding a common external tariff. 
C)  goes beyond a common market by including a common transportation policy. 
D)  goes beyond a common market by including a common agricultural policy.

Question 12

Suppose that government procurement liberalization results in the U.K.government importing automobiles from Germany, the low-cost EU manufacturer.Cost savings could result from all of the following EXCEPT

Accepted Answer

A)  competition effect. 
B)  scale-economy effect. 
C)  protective effect. 
D)  trade effect. 
A)  competition effect. 
B)  scale-economy effect. 
C)  protective effect. 
D)  trade effect.

Question 13

The World Trade Organization's efforts to promote trade liberalization globally

Accepted Answer

A)  have become easier. 
B)  have become more difficult. 
C)  have remained stable. 
D)  cannot be achieved. 
A)  have become easier. 
B)  have become more difficult. 
C)  have remained stable. 
D)  cannot be achieved.

Question 14

According to the theory of optimum currency areas, a currency area has the least chance for success when

Accepted Answer

A)  countries of the currency area have differing business cycles. 
B)  workers have a high degree of mobility across borders of the currency area. 
C)  prices and wages can be adjusted in response to economic disturbances. 
D)  a single monetary policy affects all member countries in the same manner. 
A)  countries of the currency area have differing business cycles. 
B)  workers have a high degree of mobility across borders of the currency area. 
C)  prices and wages can be adjusted in response to economic disturbances. 
D)  a single monetary policy affects all member countries in the same manner.

Question 15

At the Maastricht Summit of 1991, members of the European Union expressed the goal of achieving the common market stage of economic integration.

Accepted Answer

A) True 
 B)False

Question 16

If a customs union includes the low-cost supplier of the world, there would be no adverse trade diversion effect that would counteract the positive trade creation effect.

Accepted Answer

A) True 
 B)False

Question 17

Within a customs union, broader markets may also promote greater competition among producers.

Accepted Answer

A) True 
 B)False

Question 18

A free trade area is like a customs union EXCEPT its members adopt a common external tariff structure.

Accepted Answer

A) True 
 B)False

Question 19

If Chile and Mexico abolish all tariffs on each other's products while maintaining their own tariffs against other countries, these two countries have formed a customs union.

Accepted Answer

A) True 
 B)False

Question 20

By 1992 the European Union had become a full-fledged

Accepted Answer

A)  economic union. 
B)  monetary union. 
C)  common market. 
D)  fiscal union. 
A)  economic union. 
B)  monetary union. 
C)  common market. 
D)  fiscal union.

The larger the size and the greater the number of countries in a customs union, the greater the trade diversion effect.

In the United States, the proposed North American Free Trade Agreement was generally supported by

The European Union's variable levy is essentially a sliding-scale tariff applied to imports of agricultural products.

Which organization was founded in 1957 whose objective was to create an economic union among its members?

As of 2002, members of the European Monetary Union agreed to replace their currencies with the

Concerning the stages of economic integration, by the early 1990s, the European Union had essentially reached the stage of a (an)

Suppose that Mexico and Canada form a free trade area.The Mexicans then decrease refrigerator manufacturing and increase imports of refrigerators from Canada, while the Canadians decrease auto manufacturing and import more autos from Mexico.This is an example of trade creation.

When Mexico became a part of the North American Free Trade Agreement, along with Canada and the United States, it

U.S.labor unions argued against the North American Free Trade Agreement on the grounds that it would result in U.S.companies relocating in Mexico in order to take advantage of lower wage rates.

Regarding stages of economic integration, a customs union

Suppose that government procurement liberalization results in the U.K.government importing automobiles from Germany, the low-cost EU manufacturer.Cost savings could result from all of the following EXCEPT

The World Trade Organization's efforts to promote trade liberalization globally

According to the theory of optimum currency areas, a currency area has the least chance for success when

At the Maastricht Summit of 1991, members of the European Union expressed the goal of achieving the common market stage of economic integration.

If a customs union includes the low-cost supplier of the world, there would be no adverse trade diversion effect that would counteract the positive trade creation effect.

Within a customs union, broader markets may also promote greater competition among producers.

A free trade area is like a customs union EXCEPT its members adopt a common external tariff structure.

If Chile and Mexico abolish all tariffs on each other's products while maintaining their own tariffs against other countries, these two countries have formed a customs union.

By 1992 the European Union had become a full-fledged

The International Economy and Globalization

Foundations of Modern Trade Theory Comparative Advantage

Sources of Comparative Advantage

Tariffs

Nontariff Trade Barriers

Trade Regulations and Industrial Policies

Trade Policies for the Developing Nations

International Factor Movements and Multinational Enterprises

The Balance of Payments

Foreign Exchange

Exchange Rate Determination

Mechanisms of International Adjustment

Exchange Rate Adjustments and the Balance of Payments

Exchange Rate Systems and Currency Crises

Filters

Exam 8: Regional Trading Arrangements

The larger the size and the greater the number of countries in a customs union, the greater the trade diversion effect.

In the United States, the proposed North American Free Trade Agreement was generally supported by

The European Union's variable levy is essentially a sliding-scale tariff applied to imports of agricultural products.

Which organization was founded in 1957 whose objective was to create an economic union among its members?

As of 2002, members of the European Monetary Union agreed to replace their currencies with the

Concerning the stages of economic integration, by the early 1990s, the European Union had essentially reached the stage of a (an)

Suppose that Mexico and Canada form a free trade area.The Mexicans then decrease refrigerator manufacturing and increase imports of refrigerators from Canada, while the Canadians decrease auto manufacturing and import more autos from Mexico.This is an example of trade creation.

When Mexico became a part of the North American Free Trade Agreement, along with Canada and the United States, it

U.S.labor unions argued against the North American Free Trade Agreement on the grounds that it would result in U.S.companies relocating in Mexico in order to take advantage of lower wage rates.

Regarding stages of economic integration, a customs union

Suppose that government procurement liberalization results in the U.K.government importing automobiles from Germany, the low-cost EU manufacturer.Cost savings could result from all of the following EXCEPT

The World Trade Organization's efforts to promote trade liberalization globally

According to the theory of optimum currency areas, a currency area has the least chance for success when

At the Maastricht Summit of 1991, members of the European Union expressed the goal of achieving the common market stage of economic integration.

If a customs union includes the low-cost supplier of the world, there would be no adverse trade diversion effect that would counteract the positive trade creation effect.

Within a customs union, broader markets may also promote greater competition among producers.

A free trade area is like a customs union EXCEPT its members adopt a common external tariff structure.

If Chile and Mexico abolish all tariffs on each other's products while maintaining their own tariffs against other countries, these two countries have formed a customs union.

By 1992 the European Union had become a full-fledged

The International Economy and Globalization

Foundations of Modern Trade Theory Comparative Advantage

Sources of Comparative Advantage

Tariffs

Nontariff Trade Barriers

Trade Regulations and Industrial Policies

Trade Policies for the Developing Nations

International Factor Movements and Multinational Enterprises

The Balance of Payments

Foreign Exchange

Exchange Rate Determination

Mechanisms of International Adjustment

Exchange Rate Adjustments and the Balance of Payments

Exchange Rate Systems and Currency Crises

Filters