Exam 8: Regional Trading Arrangements

Assume that the formation of a customs union turns out to include the lowest-cost world producer of the product in question.Which effect could NOT occur for the participating countries?

Critics of the North American Free Trade Agreement feared that many Americans would migrate to Mexico to find jobs.

When the North American Free Trade Agreement was being considered, American critics argued that it would likely result in

The task of creating an economic union is

By the mid-1990s, the European Union had essentially achieved the common market stage of economic integration.

If Chile and Mexico form a free trade agreement, the welfare of the two countries will necessarily increase.

If a customs union included all of the countries in the world, there could exist only trade creation, not trade diversion.

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. The deadweight welfare loss to Greece resulting from the $20 tariff equals

An objective of all of the members of the European Union has been to

According to the theory of optimal currency areas, there are gains to be achieved from sharing a currency across national boundaries.These gains include

Under the European Union's common agricultural policy, a variable import levy equals the

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

What is meant by economic integration?

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

Regarding the interests of a nonmember nation of a regional trading agreement

Members of the European Union find that "trade creation" is fostered when their economies are

The figure below depicts the steel market for Portugal, a small nation that is unable to affect the world price. Assume that Germany and France can supply steel to Portugal at a price of $200 and $300, respectively. Figure 8.2. Portugal's Steel Market -Consider Figure 8.2.With free trade, Portugal will import 25 tons of steel from Germany at a price of $200 per ton.

The figure below depicts the steel market for Portugal, a small nation that is unable to affect the world price. Assume that Germany and France can supply steel to Portugal at a price of $200 and $300, respectively. Figure 8.2. Portugal's Steel Market -Consider Figure 8.2.With free trade, Portugal will

Regarding the benefits of regional trade agreements, which of the following is NOT a benefit?

As new regional trading arrangements are formed, the opportunity cost of remaining outside