Chapter 9 Regional Trading Arrangements

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CHAPTER 9
REGIONAL TRADING Arrangements

MULTIPLE-CHOICE QUESTIONS

1.THE EUROPEAN UNION IS PRIMARILY INTENDED TO PERMIT:
a.Countries to adopt scientific tariffs on imports
b.An agricultural commodity cartel within the group
c.The adoption of export tariffs for revenue purposes
d. Free movement of resources and products among member nations

2.Which of the following represents the stage where economic integration is most complete? a.Economic union
b.Customs union
c. Monetary union
d.Common market

3.Which of the following represents the stage where economic integration is least complete? a. Free trade area
b.Monetary union
c.Common market
d.Customs union

4.Customs union theory reasons that the formation of a customs union will decrease members’ real welfare when the: a. Trade diversion effect exceeds the trade creation effect b.Trade production effect exceeds the trade consumption effect c.Trade consumption effect exceeds the trade production effect d.Trade creation effect exceeds the trade diversion effect

5.Which economic integration scheme is solely intended to abolish trade restrictions among member countries, while setting up common tariffs against nonmembers? a.Economic union
b.Common market
c.Free trade area
d. Customs union

6.By 1992 the European Union had become a full-fledged: a.Economic union
b.Monetary union
c. Common market
d.Fiscal union

7.Which device has the European Union used to equalize farm-product import prices with politically determined European Union prices, regardless of shifts in world prices? a. Variable levies

b.Import quotas
c.Import subsidies
d.Domestic content regulations

8.Which trade instrument has the European Union used to insulate its producers and consumers of agricultural goods from the impact of changing demand and supply conditions in the rest of the world? a.Domestic content regulations

b. Variable import levies
c.Voluntary export quotas
d.Orderly marketing agreements

9.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? a.Trade creation-production effect

b.Trade creation-consumption effect
c. Trade diversion
d.Scale economies and competition

10.Which organization of nations permits free trade among its members in industrial goods, while each member maintains freedom in its trade policies toward non-member countries? a.European Union

b.Benelux
c.Council for Mutual Economic Assistance
d. North American Free Trade Association

11.Which of the following organizations is considered a regional trading arrangement? a.Organization of Petroleum Exporting Countries
b.North Atlantic Treaty Organization
c. Benelux
d.International Tin Agreement

12.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): a.Dynamic welfare losses

b.Dynamic welfare gains
c.Trade creation
d. Trade diversion

13.Which form of economic integration occurs when participating countries abolish tariffs on trade among themselves, establish a common tariff on imports from nonmembers, and permit free movement of capital and labor within the organization? a.Free trade area

b.Economic union
c. Common market
d.Monetary union

14.A static welfare effect resulting from the formation of the European Union would be: a.Economies of scale
b. Trade diversion
c.Investment incentives
d.Increased competition

15.A dynamic welfare gain resulting from the...
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