Question 1

The Southern Common Market (MERCOSUR) is actually a _____.

Accepted Answer

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

Question 2

Which of the following is true of trade embargoes?

Accepted Answer

A) A trade embargo refers to a uniform tariff being imposed on all imported products by a country. 
B) Embargoes are discriminatory restrictions or bans on economic exchange. 
C) Unlike other trade restrictions, a trade embargo does not harm the imposing country. 
D) Trade embargoes refer to import bans on tangible goods, and not services. 
A) A trade embargo refers to a uniform tariff being imposed on all imported products by a country. 
B) Embargoes are discriminatory restrictions or bans on economic exchange. 
C) Unlike other trade restrictions, a trade embargo does not harm the imposing country. 
D) Trade embargoes refer to import bans on tangible goods, and not services. B

Question 3

The NAFTA is an example of a(n):

Accepted Answer

A) free-trade area. 
B) customs union. 
C) common market. 
D) economic union. 
A) free-trade area. 
B) customs union. 
C) common market. 
D) economic union. A

Question 4

When a few countries join a trade bloc, it not only expands the market for their firms but also creates a larger market for the countries outside the bloc.

Accepted Answer

A) True 
 B)False

Question 5

As of 2011, which of the following Balkan states was closest to qualifying for EU membership?

Accepted Answer

A) Serbia 
B) Bosnia 
C) Croatia 
D) Albania 
A) Serbia 
B) Bosnia 
C) Croatia 
D) Albania

Question 6

The figure given below shows the U.S. market for imported wine. For simplicity, we consider export supply curves to be flat. Chilean wine is available for $480 per barrel and French wine is available for $420 per barrel.   Suppose the United States has a tariff of $80 per barrel on imported wine. Then, the U.S. joins a free trade area with Chile. How many barrels of wine will the United States import after joining the free trade area?

Accepted Answer

A) 15 million barrels 
B) 22 million barrels 
C) 10 million barrels 
D) zero barrels 
A) 15 million barrels 
B) 22 million barrels 
C) 10 million barrels 
D) zero barrels

Question 7

The figure given below shows the U.S. market for imported wine. For simplicity, we consider export supply curves to be flat. Chilean wine is available for $480 per barrel and French wine is available for $420 per barrel.   Suppose the United States has a tariff of $80 per barrel on imported wine. Then, the U.S. joins a free trade area with Chile. How much will the U.S. government tariff revenue change (as a result of joining the free trade area)?

Accepted Answer

A) Increase by $50 million 
B) Decrease by $250 million 
C) Increase by $600 million 
D) Decrease by $800 million 
A) Increase by $50 million 
B) Decrease by $250 million 
C) Increase by $600 million 
D) Decrease by $800 million

Question 8

The gains from trade creation is likely to be larger for a country if:

Accepted Answer

A) its import demand curve is relatively elastic. 
B) it mainly imports primary products. 
C) the country's government sufficiently subsidizes the production of its exportable goods. 
D) the supply of the imported good by the foreigners is relatively inelastic. 
A) its import demand curve is relatively elastic. 
B) it mainly imports primary products. 
C) the country's government sufficiently subsidizes the production of its exportable goods. 
D) the supply of the imported good by the foreigners is relatively inelastic.

Question 9

The figure given below shows the U.S. market for imported wine. For simplicity, we consider export supply curves to be flat. Chilean wine is available for $480 per barrel and French wine is available for $420 per barrel.   Suppose the United States has a tariff of $80 per barrel on imported wine. Then, the United States joins a trade bloc with Chile. Calculate the loss suffered by the U.S. arising from the shift of trade from low-cost exporters to higher-cost bloc-partner exporter.

Accepted Answer

A) $50 million 
B) $250 million 
C) $600 million 
D) $800 million 
A) $50 million 
B) $250 million 
C) $600 million 
D) $800 million

Question 10

It has been observed that trade within MERCOSUR trade has increased most rapidly in protected capital-intensive products like automobiles, machinery and electronic goods in which the member countries enjoy global comparative advantage.

Accepted Answer

A) True 
 B)False

Question 11

The formation of a trade bloc necessarily improves well-being worldwide because it is a step toward free trade.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following is true of an economic union?

Accepted Answer

A) Free movement of resources, but restricted movement of goods among the member countries 
B) The members have a common set of tariffs among themselves but the external tariff rates are determined independently 
C) Free movement of goods, but restricted movement of resources across the member countries 
D) Harmonization of all economic policies in the member countries 
A) Free movement of resources, but restricted movement of goods among the member countries 
B) The members have a common set of tariffs among themselves but the external tariff rates are determined independently 
C) Free movement of goods, but restricted movement of resources across the member countries 
D) Harmonization of all economic policies in the member countries

Question 13

A trade bloc allows member countries to import from other member countries freely, but imposes trade barriers against imports from countries outside the bloc.

Accepted Answer

A) True 
 B)False

Question 14

The figures given below illustrate a situation of a trade embargo. In Figure (a) Dd and Sd are the domestic demand and supply curves of the embargoing countries. The import price is P0 and the target country imports the amount Q0 before the embargo is imposed.   As a result of this embargo, the exporting countries not participating in the embargo gain area _____.

Accepted Answer

A) a 
B) b 
C) c 
D) (b + c) 
A) a 
B) b 
C) c 
D) (b + c)

Question 15

Gains from joining a trade bloc will be higher if the import demands of the member countries are relatively elastic.

Accepted Answer

A) True 
 B)False

Question 16

H. Ross Perot's famous claim in 1992 that NAFTA would cause a "great sucking sound" referred to:

Accepted Answer

A) a huge increase in foreign direct investment in the U.S. 
B) an instant shift of jobs from the U.S.to the Mexico. 
C) a rapid increase in the U.S.exports to Canada. 
D) a rapid increase in the wage inequality in Mexico. 
A) a huge increase in foreign direct investment in the U.S. 
B) an instant shift of jobs from the U.S.to the Mexico. 
C) a rapid increase in the U.S.exports to Canada. 
D) a rapid increase in the wage inequality in Mexico.

Question 17

Which of the following is true of a common market?

Accepted Answer

A) The member countries export similar products to the non-member countries. 
B) The member countries do not import any good from the non-member countries. 
C) The member countries have identical monetary and fiscal policies. 
D) There is free movement of capital and labor among the member countries. 
A) The member countries export similar products to the non-member countries. 
B) The member countries do not import any good from the non-member countries. 
C) The member countries have identical monetary and fiscal policies. 
D) There is free movement of capital and labor among the member countries.

Question 18

Which of the following correctly identifies the impact of the formation of NAFTA on Mexico?

Accepted Answer

A) Mexico's import of financial services and high-tech equipment from the U.S.has declined. 
B) After Mexico joined NAFTA, the average wage rates for the unskilled workers have declined. 
C) Mexican exports of fruits and vegetables to the United States declined substantially. 
D) NAFTA allows Mexico to better exploit its comparative advantage based on low-skilled workers in such products as apparels, food crops, etc. 
A) Mexico's import of financial services and high-tech equipment from the U.S.has declined. 
B) After Mexico joined NAFTA, the average wage rates for the unskilled workers have declined. 
C) Mexican exports of fruits and vegetables to the United States declined substantially. 
D) NAFTA allows Mexico to better exploit its comparative advantage based on low-skilled workers in such products as apparels, food crops, etc.

Question 19

Suppose Chile joins a trade bloc formed by Argentina, Brazil, Paraguay, and Uruguay. Before joining the trade bloc, the Chilean government has a tariff of 30 percent on imported meat, and Chile's imports of 40,000 tons of meat came exclusively from the United States. The U.S. sold meat at a price of $2,000 per ton in the international market. After joining the trade bloc, Chile switched to importing meat from the other member countries at a price of $2,100 per ton. Its import increased to 50,000 tons. Calculate the amount of trade creation and trade diversion as a result of this change. For this product, did Chile gain economic well-being from joining the trade bloc? If so, then how much? If not, then by how much would Chilean imports of meat have to increase for Chile to benefit from joining the trade bloc?

Accepted Answer

The tariff-inclusive price of meat impor

Question 20

Explain the basic requirements a country needs to fulfill to become a member of the European Union and the process of integration of new members.

Accepted Answer

The basic requirements to join the EU ar

The Southern Common Market (MERCOSUR) is actually a _____.

Which of the following is true of trade embargoes?

The NAFTA is an example of a(n):

When a few countries join a trade bloc, it not only expands the market for their firms but also creates a larger market for the countries outside the bloc.

As of 2011, which of the following Balkan states was closest to qualifying for EU membership?

The gains from trade creation is likely to be larger for a country if:

It has been observed that trade within MERCOSUR trade has increased most rapidly in protected capital-intensive products like automobiles, machinery and electronic goods in which the member countries enjoy global comparative advantage.

The formation of a trade bloc necessarily improves well-being worldwide because it is a step toward free trade.

Which of the following is true of an economic union?

A trade bloc allows member countries to import from other member countries freely, but imposes trade barriers against imports from countries outside the bloc.

Gains from joining a trade bloc will be higher if the import demands of the member countries are relatively elastic.

H. Ross Perot's famous claim in 1992 that NAFTA would cause a "great sucking sound" referred to:

Which of the following is true of a common market?

Which of the following correctly identifies the impact of the formation of NAFTA on Mexico?

Explain the basic requirements a country needs to fulfill to become a member of the European Union and the process of integration of new members.

International Economics Is Different

The Basic Theory Using Demand and Supply

Why Everybody Trades: Comparative Advantage

Trade: Factor Availability and Factor Proportions Are Key

Who Gains and Who Loses From Trade

Scale Economies, Imperfect Competition, and Trade

Growth and Trade Part II: Trade Policy

Analysis of a Tariff

Nontariff Barriers to Imports

Arguments for and Against Protection

Pushing Exports

Trade and the Environment

Trade Policies for Developing Countries

Multinationals and Migration: International Factor Movements

Payments Among Nations

The Foreign Exchange Market

Forward Exchange and International Financial Investment

What Determines Exchange Rates

Government Policies Toward the Foreign Exchange Market

International Lending and Financial Crises

How Does the Open Macroeconomy Work

Internal and External Balance With Fixed Exchange Rates

Floating Exchange Rates and Internal Balance

National and Global Choices: Floating Rates and the Alternatives

Filters

Exam 12: Trade Blocs and Trade Blocks

The Southern Common Market (MERCOSUR) is actually a _____.

Which of the following is true of trade embargoes?

The NAFTA is an example of a(n):

When a few countries join a trade bloc, it not only expands the market for their firms but also creates a larger market for the countries outside the bloc.

As of 2011, which of the following Balkan states was closest to qualifying for EU membership?

The gains from trade creation is likely to be larger for a country if:

It has been observed that trade within MERCOSUR trade has increased most rapidly in protected capital-intensive products like automobiles, machinery and electronic goods in which the member countries enjoy global comparative advantage.

The formation of a trade bloc necessarily improves well-being worldwide because it is a step toward free trade.

Which of the following is true of an economic union?

A trade bloc allows member countries to import from other member countries freely, but imposes trade barriers against imports from countries outside the bloc.

Gains from joining a trade bloc will be higher if the import demands of the member countries are relatively elastic.

H. Ross Perot's famous claim in 1992 that NAFTA would cause a "great sucking sound" referred to:

Which of the following is true of a common market?

Which of the following correctly identifies the impact of the formation of NAFTA on Mexico?

Explain the basic requirements a country needs to fulfill to become a member of the European Union and the process of integration of new members.

International Economics Is Different

The Basic Theory Using Demand and Supply

Why Everybody Trades: Comparative Advantage

Trade: Factor Availability and Factor Proportions Are Key

Who Gains and Who Loses From Trade

Scale Economies, Imperfect Competition, and Trade

Growth and Trade Part II: Trade Policy

Analysis of a Tariff

Nontariff Barriers to Imports

Arguments for and Against Protection

Pushing Exports

Trade and the Environment

Trade Policies for Developing Countries

Multinationals and Migration: International Factor Movements

Payments Among Nations

The Foreign Exchange Market

Forward Exchange and International Financial Investment

What Determines Exchange Rates

Government Policies Toward the Foreign Exchange Market

International Lending and Financial Crises

How Does the Open Macroeconomy Work

Internal and External Balance With Fixed Exchange Rates

Floating Exchange Rates and Internal Balance

National and Global Choices: Floating Rates and the Alternatives

Filters