Exam 7: Trade Policies for the Developing Nations

Trade creation tends to more than offset trade diversion for a home country forming a customs union with partner countries when: (1) the tariff rate in the home country is high prior to the formation of the customs union; (2) there are a large number of countries forming the customs union.

East Asian economies have performed well by

At the Maastricht Summit of 1991,European Union negotiators called for the pursuit of a:

Luxembourg is a member of:

Import substitution policies have been highly successful in fostering employment in new,emerging industries since these policies prevent the import of foreign capital goods.

The replacement of imports of one nation with imports of another nation is known as "import substitution."

As a profit-maximizing cartel,the Organization of Petroleum Exporting Countries would produce a greater output and charge a lower price than what would occur in a competitive market.

The diagram below illustrates the international tin market.Assume that producing and consuming countries establish an international commodity agreement under which the target price of tin is $5 per pound. Figure 7.1.Defending the Target Price in Face of Changing Demand Conditions -Consider Figure 7.1.Suppose the demand for tin decreases from D0 to D2.Under a buffer stock system,the buffer-stock manager could maintain the target price by:

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.Suppose Greece had formed a customs union with Germany,rather than France.The value of the trade diversion effect would be:

The advanced (industrial) countries of the world tend to be characterized by all of the following except

Forming a free-trade agreement with the United States provided Canadian producers a danger and an opportunity.The danger was that U.S.producers might be more price competitive than Canadian producers; the opportunity was that longer production runs for Canadian producers,made possible by a free-trade agreement,would result in cost reductions due to economies of scale.

Stabilizing commodity prices around long-term trends tends to benefit exporters at the expense of importers in markets characterized by:

The European Union has achieved all of the following except:

Which industrialization policy used by developing countries places emphasis on the comparative advantage principle as a guide to resource allocation?

The formation of the European Monetary Union is expected to entail benefits for member countries which include all of the following except:

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

Over the long run,the formation of a customs union may yield welfare gains due to economies of scale,greater competition,and stimulus to investment.

Developing countries have complained that because their commodity terms of trade has deteriorated in recent decades,they should receive preferential tariff treatment from industrialized countries.

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

To prevent the market price of tin from falling below the target price,the manager of a buffer stock would purchase any excess supply of tin that exists at the target price.