Question 1

If the United States and Canada abolish all tariffs on each other's goods and implement a common tariff on goods imported from other countries,there occurs a (an):

Accepted Answer

A)  Free-trade area 
B)  Customs union 
C)  Common market 
D)  Economic union

Question 2

Which economic integration scheme is solely intended to abolish trade restrictions among member countries,while setting up common tariffs against nonmembers?

Accepted Answer

A)  Economic union 
B)  Common market 
C)  Free trade area 
D)  Customs union

Question 3

Import substitution decreases reliance on international trade by fostering export-competing industries.

Accepted Answer

A) True 
 B)False

Question 4

The task of creating an economic union is:

Accepted Answer

A)  difficult 
B)  relatively easy 
C)  similar to creating a customs union 
D)  None of the above

Question 5

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

Accepted Answer

A)  $7 
B)  $11 
C)  $16 
D)  $19

Question 6

Trade creation and trade diversion refer to the short run (static) effects of economic integration while economies of scale,stimulus to investment,and effects on competition refer to the long run (dynamic) effects.

Accepted Answer

A) True 
 B)False

Question 7

For the oil-importing countries,the increases in oil prices in 1973-1974 and 1979-1980 resulted in all of the following except:

Accepted Answer

A)  Balance of trade deficits 
B)  Price inflation 
C)  Constrained economic growth 
D)  Improving terms of trade

Question 8

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 produces 15 tons of steel,consumes 30 tons of steel,and imports 15 tons of steel.

Accepted Answer

A) True 
 B)False

Question 9

Prolonged defense of a price ceiling tends to increase the supply of a commodity held by a buffer stock manager,thus putting downward pressure on price.

Accepted Answer

A) True 
 B)False

Question 10

Suppose that the United Kingdom and Italy abolish all tariffs on each other's goods and all restrictions on movements of factors of production between them.They also implement a common protectionist policy toward other countries.This is an example of a (an):

Accepted Answer

A)  Free-trade area 
B)  Customs union 
C)  Common market 
D)  Economic union

Question 11

World welfare under a customs union

Accepted Answer

A)  Increases due to a trade creation effect 
B)  Decreases due to a trade diversion effect 
C)  Depends on the relative strength of the trade creation effect and the trade diversion effect 
D)  All of the above

Question 12

Under the common agricultural policy,exports of any surplus quantities of EU produce are encouraged through the usage of:

Accepted Answer

A)  Variable levies 
B)  Export subsidies 
C)  Import quotas 
D)  Countertrade

Question 13

Suppose that Canada has domestic firms that could supply its entire market for radios at a price of $50,while U.S.firms could supply radios at $40 and Mexico at $30.Suppose that Canada initially has a 50 percent tariff on imports of radios and then forms a free trade area with Mexico.As a result,Canada realizes:

Accepted Answer

A)  Trade creation,no trade diversion,and overall welfare gains 
B)  Trade creation,no trade diversion,and overall welfare losses 
C)  Trade diversion,no trade creation,and potential overall welfare losses 
D)  Trade diversion,trade creation,and potential overall welfare gains

Question 14

The OPEC nations during the 1970s manifested their market power by utilizing:

Accepted Answer

A)  Export tariffs levied for revenue purposes 
B)  Export tariffs levied for protective purposes 
C)  Import tariffs levied for protective purposes 
D)  Import tariffs levied for revenue purposes

Question 15

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.Comparing the trade creation and trade diversion effects,the impact of the Greece/France customs union on the welfare of Greece is:

Accepted Answer

A)  A $5 increase in economic welfare 
B)  A $10 increase in economic welfare 
C)  A $5 decrease in economic welfare 
D)  No change in economic welfare

Question 16

Most of China's manufactured exports have constituted labor-intensive goods.

Accepted Answer

A) True 
 B)False

Question 17

To be considered a good candidate for an export cartel,a commodity should:

Accepted Answer

A)  Be a manufactured good 
B)  Be a primary product 
C)  Have a low price elasticity of supply 
D)  Have a high price elasticity of demand

Question 18

Describe the flying-geese pattern of economic growth? What countries have pursued this strategy?

Accepted Answer

The answer of Describe the flying-geese pattern of economic growth?...

Question 19

Which of the following organizations is considered a regional trading arrangement?

Accepted Answer

A)  Organization of Petroleum Exporting Countries 
B)  North Atlantic Treaty Organization 
C)  Benelux 
D)  International Tin Agreement

Question 20

Government procurement liberalization permits a country to realize cost savings resulting from the trade effect,competition effect,and economies-of-scale effect.

Accepted Answer

A) True 
 B)False

Exam 7: Trade Policies for the Developing Nations

If the United States and Canada abolish all tariffs on each other's goods and implement a common tariff on goods imported from other countries,there occurs a (an) :

Which economic integration scheme is solely intended to abolish trade restrictions among member countries,while setting up common tariffs against nonmembers?

Import substitution decreases reliance on international trade by fostering export-competing industries.

The task of creating an economic union is:

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

Trade creation and trade diversion refer to the short run (static) effects of economic integration while economies of scale,stimulus to investment,and effects on competition refer to the long run (dynamic) effects.

For the oil-importing countries,the increases in oil prices in 1973-1974 and 1979-1980 resulted in all of the following except:

Prolonged defense of a price ceiling tends to increase the supply of a commodity held by a buffer stock manager,thus putting downward pressure on price.

Suppose that the United Kingdom and Italy abolish all tariffs on each other's goods and all restrictions on movements of factors of production between them.They also implement a common protectionist policy toward other countries.This is an example of a (an) :

World welfare under a customs union

Under the common agricultural policy,exports of any surplus quantities of EU produce are encouraged through the usage of:

The OPEC nations during the 1970s manifested their market power by utilizing:

Most of China's manufactured exports have constituted labor-intensive goods.

To be considered a good candidate for an export cartel,a commodity should:

Describe the flying-geese pattern of economic growth? What countries have pursued this strategy?

Which of the following organizations is considered a regional trading arrangement?

Government procurement liberalization permits a country to realize cost savings resulting from the trade effect,competition effect,and economies-of-scale effect.