Exam 7: Trade Policies for the Developing Nations

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.

The EU has abolished restrictions on agricultural products traded internally.

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?

The so-called Four Tigers include Australia,South Korea,Taiwan,and Hong Kong.

A multilateral contract stipulates the maximum price at which importing nations will purchase guaranteed quantities from producing nations and the minimum price at which producing nations will sell guaranteed amounts to importing nations.

The trade problems of the developing countries have included all of the following except

Assuming identical cost and demand curves,OPEC as a cartel will,in comparison to a competitive industry:

When cartel members agree to restrict output to increase the price of their product,a single member of the cartel has an economic incentive to violate the agreement by increasing its output so as to increase profits.

Empirical research indicates that the demand and supply schedules for most primary products are relatively inelastic to changes in price.

Concerning the hypothesis that there has occurred a long-run deterioration in the developing countries' terms of trade,empirical studies provide:

The common agriculture policy of the European Union has supported European farmers via:

When products from high-cost suppliers within a customs union replace imports from a low-cost nation that is not a member of the customs union,there exist(s):

The majority of developing-nation exports are primary products such as agricultural goods and raw materials; of the manufactured goods exported by developing nations,most are labor-intensive goods.

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.The value of the trade creation effect,resulting from the Greece/France customs union,equals:

In 1999 the United States revoked the normal-trade-relations (most-favored-nation) status it provided China in retaliation for China's suppression of human rights.

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:

Some trade creation was expected to occur as a result of the U.S.-Canada free-trade agreement,since Canadian exports to the United States and U.S.exports to Canada were expected to expand at the expense of imports from Germany and Japan that faced trade restrictions.

Figure 7.3.World Oil Market -Consider Figure 7.3.Under a profit-maximizing cartel,the quantity of oil produced equals:

Which of the following situations reduces the likelihood of successful operation of a cartel?

An advantage of the European Monetary Union (Eurozone) is that its member countries have common fiscal policies.