international trade

Topics: International trade, European Union, Free trade Pages: 15 (3123 words) Published: January 12, 2014
CHAPTER 8

REGIONAL TRADING AGREEMENTS
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
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
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
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 formation of the European Union would be: a.Trade diversion
b.Trade creation
c.Diseconomies of scale
d.Economies of scale
16.Which organization was founded in 1957 whose objective was to create an economic union among its members? a.General Agreements on Tariffs and Trade
b.Organization of Economic Cooperation and Development
c.European Union
d.Latin American Free Trade Association
18.Which nation is not a member of the North American Free Trade Association? a.Canada
b.Greenland
c.Mexico
d.United States
20.NAFTA is a:
a.Monetary union
b.Free trade area
c.Common market
d.Customs union
22.Members of the European Union find that “trade creation” is fostered when their economies are: a.Highly competitive
b.Highly noncompetitive
c.Small in economic importance
d.Geographically distant
24.When the United States, Canada, and Mexico form a free trade area, and Mexico begins importing a product from Canada rather than from the lowest cost world producer: a.Trade diversion occurs

b.Trade creation occurs
c.World welfare rises
d.World welfare falls to zero
25.When the formation of a free trade area results in the reduction of trade with nonmember nations in favor of member countries: a.Trade devaluation occurs
b.Trade revaluation occurs
c.Trade creation occurs
d.Trade diversion occurs
26.Which country is not a member of the European Union?
a.Spain
b.Germany
c.France
d.Iceland
27.The implementation of the European Union has made it:
a.Harder for Americans to compete against the Germans in the British market b.Easier for Americans to compete against the Germans in the British market c.Harder for Americans to compete against the Japanese in the British market d.Easier for...
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