Deck 9: Regional Economic Integration

Question 1

Increased specialization leads to a fall in the standard of living.

Answer 1

False

Question 2

The summated output of the individual states is greater than the total output of the integrated bloc.

Answer 2

False

Question 3

Tariff restrictions are the most likely reason behind the failure of economic blocs in Africa.

Answer 3

False

Question 4

CARICOM was formerly known as the Andean Pact.

Question 5

NAFTA consists of Canada, Mexico, and the United States.

Question 6

The level of integration of free trade areas is greater than that of customs unions.

Question 7

An exporter from Canada would face the same tariff if importing into either Argentina or Brazil.

Question 8

Slow progress in liberalizing trade, especially for agricultural products, has prompted many developing countries to seek alternatives to the global trading system favored by the WTO.

Question 9

Some European countries have political union due to the presence of a common currency.

Question 10

The European Union is the world's largest, and most advanced regional economic bloc.

Question 11

Harmonization of standards is one of the steps taken by the EU to become an economic union.

Question 12

The Caribbean Community (CARICOM) is progressing toward establishing the Caribbean Single Market, a common market that allows for a greater degree of free movement of products, capital, and labor.

Question 13

The introduction of the euro -the EU's common currency and now one of the world's leading currencies-meant that the monetary power of national governments within the EU was taken over by the European Central Bank.

Question 14

The level of integration of a political union is the highest.

Question 15

The Common Agricultural Policy (CAP) has long been a fixture of the North American bloc.

Question 16

In economic unions, member countries often adopt standardized tax rates and exchange rates.

Question 17

Submersion of all separate national institutions and perfect unification of all policies by a common organization is a characteristic of economic unions.

Question 18

Economic nationalism refers to the economic interdependence experienced by closely associated countries that have formed an alliance.

Question 19

MERCOSUR, an economic bloc in Latin America, is an example of an economic union.

Question 20

Countries in free trade areas only import and export products and services within the regional economic bloc.

Question 21

Rationalization after regional integration reduces redundancy in a firm and thus lowers costs and improves the firm's operational efficiency.

Question 22

Under NAFTA, Canadian companies enjoy more trade and investment relationships with U. S. firms than with Mexican firms because of language similarities between Canada and the U.S.

Question 23

The intended purpose of regional integration is to ________.

A) increase the mobility of workers to countries outside the bloc
B) reduce trade and investment barriers within the bloc
C) streamline customs agency regulations within the bloc
D) discourage foreign investment into the bloc

Question 24

The most effective way for a foreign firm to enter an economic bloc is via foreign direct investment.

Question 25

Which of the following is favored by the World Trade Organization?

A) centrally planned economy
B) unilateral trading system
C) economic nationalism
D) global trading system

Question 26

The most notable characteristic of economic blocs is that the member countries share the same language and culture.

Question 27

Firms often internationalize within an economic bloc in order to reduce exposure to competition.

Question 28

Which of the following helps foster economic integration on a global scale?

A) WTO
B) EU
C) NATO
D) UN

Question 29

Which of the following exemplifies an economic bloc?

A) EU
B) WTO
C) GATT
D) UN

Question 30

Member countries that belong to the higher levels of regional integration must sacrifice control of their own economic affairs by submitting to the laws of the economic bloc's central authority.

Question 31

A formal arrangement between two or more countries to reduce or eliminate tariffs is known as a(n) ________.

A) quota arrangement
B) free trade agreement
C) memorandum of association
D) memorandum of understanding

Question 32

Which of the following is an example of a customs union?

A) NAFTA
B) ASEAN
C) MERCOSUR
D) EFTA

Question 33

Widened access to other economic blocs is one of the benefits of regional integration.

Question 34

Regional integration gives rise to trade creation and trade diversion.

Question 35

Which of the following terms refers to two or more geographically connected nations in pursuit of free trade relations?

A) grey market
B) trading diaspora
C) economic bloc
D) business strategic unit

Question 36

Members of ________ agree to adopt common tariffs and non-tariff barriers that are applied to imports from nonmember countries.

A) free trade areas
B) customs unions
C) the NAFTA
D) the EFTA

Question 37

The more diverse the economies of the member countries, the more likely the economic bloc will succeed.

Question 38

The intraregion exports of the EU are greater than its extraregion exports.

Question 39

Regional integration greatly increases the scale of the marketplace for firms inside the economic bloc.

Question 40

NAFTA is an example of which of the following levels of regional integration?

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

Question 41

Which of the following is the most likely reason for the establishment of the European Community?

A) broaden the power of communism within East Germany
B) create strict tariffs for trade and international business
C) combine forces against the powerful former Soviet Union
D) establish judicial procedures to handle trade violators

Question 42

Which of the following statements is true about the success factors for regional integration?

A) The more distinct the economies of the member countries, the more likely the economic bloc will succeed.
B) Countries should strictly hold onto their national autonomy in order to form a successful bloc.
C) Economic dynamism, a factor for successful regional integration, is often deficient in developed economies.
D) Similarity in political systems enhances prospects for a successful bloc.

Question 43

The ________ is the level of regional integration that remains an ideal and is yet to be achieved.

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

Question 44

Common markets differ from customs unions in that common markets ________.

A) allow the free movement of products, services, and factors of production between member countries
B) eliminate tariffs and non-tariff trade barriers when trade and business investments occur between member nations
C) share a regulated system of tariff rates between member nations and equally distribute tax revenue received from non-member countries
D) involve a central authority overseeing the monetary, tax, and fiscal policies of member nations

Question 45

Which of the following has the longest experience with regional integration?

A) the United States of America
B) Asia
C) Europe
D) the Middle East

Question 46

Which of the following economic blocs includes Switzerland as a member country?

A) EU
B) EFTA
C) CAN
D) APEC

Question 47

Which of the following nations is a member of MERCOSUR?

A) Spain
B) Cuba
C) Mexico
D) Argentina

Question 48

The ________ is the highest stage of regional integration that has so far been achieved.

A) political union
B) economic union
C) common market
D) customs union

Question 49

Which of the following blocs' success was most dependent on a shared language and culture?

A) NAFTA
B) MERCOSUR
C) EU
D) EFTA

Question 50

The ________ is considered as the ultimate and the most advanced level of regional integration.

A) customs union
B) common market
C) economic union
D) political union

Question 51

The ________ is the simplest and most common level of regional integration.

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

Question 52

Which of the following economic blocs will most likely merge with MERCOSUR to encompass all of South America?

A) CER
B) NAFTA
C) CARICOM
D) CAN

Question 53

Which of the following has occurred as a result of NAFTA?

A) workers at maquiladoras have instigated union strikes
B) working conditions in member nations have improved
C) Canadian exports to Europe and Asia have doubled
D) foreign investors have been replaced by U.S. firms

Question 54

Which of the following nations form the members of NAFTA?

A) the United Kingdom, France, and Italy
B) Canada, France, Britain, and Germany
C) the United States, Mexico, and Brazil
D) the United States, Canada, and Mexico

Question 55

Which of the following statements is true of the economic union?

A) Members strive to have common fiscal and monetary policies.
B) MERCOSUR is an example of an economic union.
C) To achieve greater economic integration, members establish border controls.
D) It is a level of integration that is yet to be achieved.

Question 56

Which of the following benefits do associate members of MERCOSUR enjoy?

A) legal waivers
B) low-cost labor
C) preferential trade
D) tariff exemption

Question 57

The second-largest free trade area in Europe is the ________.

A) EU
B) CAN
C) EFTA
D) BAFTA

Question 58

Which of the following is responsible for determining the admission of new member countries to the EU?

A) the Council of the European Union
B) the European Parliament
C) the European Court of Justice
D) the European Commission

Question 59

Which of the following is an example of a common market?

A) EU
B) ASEAN
C) NAFTA
D) EFTA

Question 60

Members of ________ benefitted the most from the maquiladora program.

A) NAFTA
B) EFTA
C) EU
D) MERCOSUR

Question 61

MERCOSUR (Scenario)
Bravo Luggage Company is a Latin American firm based in Buenos Aires, Argentina. Bravo has seen a sharp increase in orders over the last few months and needs to increase the amount of material imported from other countries. Currently, the materials used to manufacture Bravo luggage come from suppliers in Paraguay. Bravo managers have been approached by suppliers from Mexico and China who are both offering very competitive prices on materials.
Which of the following questions would be most important for Bravo managers to evaluate when determining which supplier to use?

A) How will using non-South American material affect the Bravo brand name?
B) Will consumer buying decisions alter if Bravo sources material from Mexico instead of Paraguay?
C) What will be the cost of materials shipped from Paraguay, Mexico, and China?
D) Are other countries planning to join MERCOSUR in the near future?

Question 62

MERCOSUR (Scenario)
Bravo Luggage Company is a Latin American firm based in Buenos Aires, Argentina. Bravo has seen a sharp increase in orders over the last few months and needs to increase the amount of material imported from other countries. Currently, the materials used to manufacture Bravo luggage come from suppliers in Paraguay. Bravo managers have been approached by suppliers from Mexico and China who are both offering very competitive prices on materials.
Which of the following should be considered when making the decision to use a MERCOSUR supplier or a non-MERCOSUR supplier?

A) Will the additional tariffs offset any savings for Bravo?
B) Do other MERCOSUR nations use outside suppliers?
C) What percentage of tariffs will Argentina receive?
D) How will Bravo managers handle the free trade area?

Question 63

Which of the following terms is used to refer to a nation in an economic bloc gradually ceasing to trade with non-member nations?

A) trade diversion
B) trade creation
C) trade mandate
D) trading diaspora

Question 64

Canada restricts U.S. film and television producers from investing in the Canadian film market in order to retain Canadian TV and movie interests in the hands of Canadians. Which of the following drawbacks of regional integration is illustrated from this example?

A) loss of national identity
B) trade diversion
C) sacrifice of autonomy
D) presence of economic dynamism

Question 65

Explain how custom unions work. What is an example of a customs union? What are some of the difficulties faced by customs unions?

Question 66

Sew-Right (Scenario)
A French sewing machine company, Sew-Right, has manufacturing facilities twenty miles outside of Paris. Since the formation of the EU, Sew-Right's managers have been considering internationalizing the Sew-Right company. Sew-Right's managers have also discussed the possibility of opening additional manufacturing facilities in Germany and Mexico. Sew-Right's managers and executives are discussing the various options at a conference, and hope to reach a decision soon.
Which of the following would most likely result if Sew-Right opened a facility in Mexico?

A) trade diversion
B) streamlined distribution facilities
C) increased relations with EU countries
D) improved access to NAFTA members

Question 67

________ is the propensity for entrepreneurial activity and the existence of business systems that can support it, in a given business environment.

A) Economic nationalism
B) Mercantilism
C) Economic dynamism
D) Business nationalism

Question 68

Sew-Right (Scenario)
A French sewing machine company, Sew-Right, has manufacturing facilities twenty miles outside of Paris. Since the formation of the EU, Sew-Right's managers have been considering internationalizing the Sew-Right company. Sew-Right's managers have also discussed the possibility of opening additional manufacturing facilities in Germany and Mexico. Sew-Right's managers and executives are discussing the various options at a conference, and hope to reach a decision soon.
Which of the following best supports Sew-Right's decision to internationalize into Germany instead of Mexico?

A) Germany is a member of the same economic bloc.
B) Language barriers will impose difficulties in Mexico.
C) Germany would be a good launching point for Asia.
D) A German facility would be modern and economical.

Question 69

Regional integration often forces corporate restructuring which may lead to ________.

A) economic nationalism
B) increased trade barriers
C) reduced global trade
D) worker layoffs

Question 70

Economic Bloc Creation (Scenario)
Country A and Country B are considering joining together into an economic bloc. Country A and Country B are both low-wage countries. Country A and Country B are separated from each other by Country C, which already belongs to an economic bloc. Representatives from Country A and Country B are meeting to discuss the possibilities of an economic bloc, and interpreters for each representative are assisting with the meeting procedures.
Which of the following statements ideally supports Country A and Country B becoming an economic bloc?

A) similarities in geographic features
B) similarities in economic situations
C) similarities in tariff rules and rates
D) linguistic and cultural similarities

Question 71

Economic Bloc Creation (Scenario)
Country A and Country B are considering joining together into an economic bloc. Country A and Country B are both low-wage countries. Country A and Country B are separated from each other by Country C, which already belongs to an economic bloc. Representatives from Country A and Country B are meeting to discuss the possibilities of an economic bloc, and interpreters for each representative are assisting with the meeting procedures.
Which of the following would most likely be the greatest obstacle to regional integration between Country A and Country B?

A) a higher supply of skilled laborers from Country A compared to Country B
B) the greater number of national institutions in Country B than Country A
C) a lack of sufficient educational systems in both Country A and Country B
D) the unwillingness of Country A to surrender autonomy to a central bloc authority

Question 72

Sew-Right (Scenario)
A French sewing machine company, Sew-Right, has manufacturing facilities twenty miles outside of Paris. Since the formation of the EU, Sew-Right's managers have been considering internationalizing the Sew-Right company. Sew-Right's managers have also discussed the possibility of opening additional manufacturing facilities in Germany and Mexico. Sew-Right's managers and executives are discussing the various options at a conference, and hope to reach a decision soon.
If Sew-Right decides to open a facility in Germany, which of the following will most likely occur first?

A) formation of new board of directors
B) modernization of the French facility
C) rationalization of Sew-Right operations
D) consolidation of Sew-Right's global suppliers

Question 73

Which of the following would be the best option for Sew-Right if managers determine the company should be in Mexico but are hesitant about entering an unfamiliar bloc?

A) establishing a joint venture with a Mexican company
B) entering into a collaborative venture with an EU-based firm
C) opening a maquiladora facility on the Mexican border
D) establishing a greenfield investment in Mexico

Question 74

Economic Bloc Creation (Scenario)
Country A and Country B are considering joining together into an economic bloc. Country A and Country B are both low-wage countries. Country A and Country B are separated from each other by Country C, which already belongs to an economic bloc. Representatives from Country A and Country B are meeting to discuss the possibilities of an economic bloc, and interpreters for each representative are assisting with the meeting procedures.
Which of the following is most important to consider when making the decision to create an economic bloc comprised of Country A and Country B?

A) Are the economic interests and goals of both countries compatible?
B) What would be the impact of an economic bloc on small firms in Country C?
C) How successful has Country C been in an economic bloc?
D) Can Country A and Country B agree on a central banking location?

Question 75

How does the creation of an economic bloc affect national boundaries?

A) It alters boundaries geographically.
B) It decreases the boundaries' importance.
C) It dissolves international boundaries.
D) It defines more strict boundaries.

Question 76

MERCOSUR (Scenario)
Bravo Luggage Company is a Latin American firm based in Buenos Aires, Argentina. Bravo has seen a sharp increase in orders over the last few months and needs to increase the amount of material imported from other countries. Currently, the materials used to manufacture Bravo luggage come from suppliers in Paraguay. Bravo managers have been approached by suppliers from Mexico and China who are both offering very competitive prices on materials.
Which of the following statements best supports using a supplier from Paraguay over a supplier from Mexico or China?

A) Material sourced from Paraguay is of better quality compared to the ones sourced from Mexico or China.
B) Material sourced from Paraguay is more durable compared to the ones sourced from Mexico or China.
C) As a member of a trade bloc, it is expected that Bravo resort to trade diversion, even if Mexico and China provide better materials at lower costs.
D) Bravo could avoid tariffs because Paraguay is a member of MERCOSUR.

Question 77

Many European firms gain access to the NAFTA bloc by ________.

A) exporting their manufactured goods to Canada
B) establishing factories in Mexico
C) advertising and marketing through U.S. media
D) establishing political connections through U.S. firms

Question 78

Since the formation of the EU, ________ has become the largest recipient of FDI from the United States.

A) France
B) Russia
C) Britain
D) Italy

Question 79

Explain the purpose of regional economic integration. Why has it been a growing trend since World War II? What are the intended results of regional integration?

Question 80

Which of the following factors will most likely contribute to the success of member nations of economic blocs?

A) similar economies
B) absence of economic dynamism
C) distinct cultures
D) emphasis on national autonomy