Question 1

Suppose that Mexico and Canada form a free-trade area and Canada begins importing steel from Mexico rather than from Germany.There occurs:

Accepted Answer

A)  Trade diversion 
B)  Trade creation 
C)  Trade destruction 
D)  Trade exhaustion 
A)  Trade diversion 
B)  Trade creation 
C)  Trade destruction 
D)  Trade exhaustion

Question 2

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 
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 3

By removing discriminatory government procurement laws within the European Union,member nations hoped to benefit from all of the following except:

Accepted Answer

A)  EU governments could purchase from the cheapest foreign suppliers 
B)  Increased competition occurs as domestic firms compete with foreign firms previously shut out of the domestic market 
C)  Industries are restructured which permits surviving firms to achieve economies of scale 
D)  Agricultural prices fall as more farmers are allowed to produce their commodities 
A)  EU governments could purchase from the cheapest foreign suppliers 
B)  Increased competition occurs as domestic firms compete with foreign firms previously shut out of the domestic market 
C)  Industries are restructured which permits surviving firms to achieve economies of scale 
D)  Agricultural prices fall as more farmers are allowed to produce their commodities

Question 4

A free trade area and a customs union differ in the way in which member nations treat imports from nonmember nations.

Accepted Answer

A) True 
 B)False

Question 5

The Maastricht Treaty of 1991 established a blueprint for economic union and monetary union for European Union members.

Accepted Answer

A) True 
 B)False

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

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 to Figure 8.1.Assume Greece levies a per-unit tariff of $20 on imports from both Germany and France.??Greece will import:

Accepted Answer

A)  1 calculator from Germany 
B)  1 calculator from France 
C)  3 calculators from Germany 
D)  3 calculators from France 
A)  1 calculator from Germany 
B)  1 calculator from France 
C)  3 calculators from Germany 
D)  3 calculators from France

Question 8

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

Question 9

Before joining the NAFTA in 1994,Mexico adopted essentially a free-trade policy toward Canada and the United States.

Accepted Answer

A) True 
 B)False

Question 10

By joining NAFTA,the United States,Canada,and Mexico would find their short-run welfare decreasing due to the:

Accepted Answer

A)  Economies of scale effect 
B)  Business investment effect 
C)  Trade creation effect 
D)  Trade diversion effect 
A)  Economies of scale effect 
B)  Business investment effect 
C)  Trade creation effect 
D)  Trade diversion effect

Question 11

When the United States was considering joining NAFTA,many economists predicted that the U.S.factor of production that would be most harmed was

Accepted Answer

A)  skilled labor 
B)  unskilled labor 
C)  capital 
D)  entrepreneurship 
A)  skilled labor 
B)  unskilled labor 
C)  capital 
D)  entrepreneurship

Question 12

The WTO's efforts to promote trade liberalization globally:

Accepted Answer

A)  have become easier 
B)  have become more difficult 
C)  have remained stable 
D)  none of these is correct 
A)  have become easier 
B)  have become more difficult 
C)  have remained stable 
D)  none of these is correct

Question 13

Which of the following represents the stage where economic integration is most complete?

Accepted Answer

A)  Economic union 
B)  Customs union 
C)  Monetary union 
D)  Common market 
A)  Economic union 
B)  Customs union 
C)  Monetary union 
D)  Common market

Question 14

What factors influence the extent of trade creation and trade diversion?

Accepted Answer

Trade creation and diversion are influen

Question 15

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 will import 25 tons of steel from Germany at a price of $200 per ton.

Accepted Answer

A) True 
 B)False

Question 16

Explain the theory of optimum currency areas.

Accepted Answer

Much of the analysis of the benefits and

Question 17

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
  
-Referring to Figure 8.1,suppose Greece forms a customs union with France.Greece will import:

Accepted Answer

A)  3 calculators at a per-unit price of $30 
B)  3 calculators at a per-unit price of $40 
C)  6 calculators at a per-unit price of $30 
D)  6 calculators at a per-unit price of $40 
A)  3 calculators at a per-unit price of $30 
B)  3 calculators at a per-unit price of $40 
C)  6 calculators at a per-unit price of $30 
D)  6 calculators at a per-unit price of $40

Question 18

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.If Portugal levies a 100 percent nondiscriminatory tariff on its steel imports,it will purchase 5 tons of steel from France at a price of $500 per ton.

Accepted Answer

A) True 
 B)False

Question 19

When a group of countries establish a free-trade area,they achieve the highest stage of economic integration.

Accepted Answer

A) True 
 B)False

Question 20

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?

Accepted Answer

A)  Domestic content regulations 
B)  Variable import levies 
C)  Voluntary export quotas 
D)  Orderly marketing agreements 
A)  Domestic content regulations 
B)  Variable import levies 
C)  Voluntary export quotas 
D)  Orderly marketing agreements

Suppose that Mexico and Canada form a free-trade area and Canada begins importing steel from Mexico rather than from Germany.There occurs:

By removing discriminatory government procurement laws within the European Union,member nations hoped to benefit from all of the following except:

A free trade area and a customs union differ in the way in which member nations treat imports from nonmember nations.

The Maastricht Treaty of 1991 established a blueprint for economic union and monetary union for European Union members.

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.

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

Before joining the NAFTA in 1994,Mexico adopted essentially a free-trade policy toward Canada and the United States.

By joining NAFTA,the United States,Canada,and Mexico would find their short-run welfare decreasing due to the:

When the United States was considering joining NAFTA,many economists predicted that the U.S.factor of production that would be most harmed was

The WTO's efforts to promote trade liberalization globally:

Which of the following represents the stage where economic integration is most complete?

What factors influence the extent of trade creation and trade diversion?

Explain the theory of optimum currency areas.

When a group of countries establish a free-trade area,they achieve the highest stage of economic integration.

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?

The International Economy and Globalization

Foundations of Modern Trade Theory: Comparative Advantage

Sources of Comparative Advantage

Tariffs

Nontariff Trade Barriers

Trade Regulations and Industrial Policies

Trade Policies for the Developing Nations

International Factor Movements and Multinational Enterprises

The Balance-of-payments

Foreign Exchange

Exchange Rate Determination

Mechanisms of International Adjustment

Exchange Rate Adjustments and the Balance-of-payments

Exchange Rate Systems and Currency Crises

Macroeconomic Policy in an Open-economy

International Banking: Reserves, Debt, and Risk

Filters

Exam 8: Regional Trading Arrangements

Suppose that Mexico and Canada form a free-trade area and Canada begins importing steel from Mexico rather than from Germany.There occurs:

By removing discriminatory government procurement laws within the European Union,member nations hoped to benefit from all of the following except:

A free trade area and a customs union differ in the way in which member nations treat imports from nonmember nations.

The Maastricht Treaty of 1991 established a blueprint for economic union and monetary union for European Union members.

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.

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

Before joining the NAFTA in 1994,Mexico adopted essentially a free-trade policy toward Canada and the United States.

By joining NAFTA,the United States,Canada,and Mexico would find their short-run welfare decreasing due to the:

When the United States was considering joining NAFTA,many economists predicted that the U.S.factor of production that would be most harmed was

The WTO's efforts to promote trade liberalization globally:

Which of the following represents the stage where economic integration is most complete?

What factors influence the extent of trade creation and trade diversion?

Explain the theory of optimum currency areas.

When a group of countries establish a free-trade area,they achieve the highest stage of economic integration.

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?

The International Economy and Globalization

Foundations of Modern Trade Theory: Comparative Advantage

Sources of Comparative Advantage

Tariffs

Nontariff Trade Barriers

Trade Regulations and Industrial Policies

Trade Policies for the Developing Nations

International Factor Movements and Multinational Enterprises

The Balance-of-payments

Foreign Exchange

Exchange Rate Determination

Mechanisms of International Adjustment

Exchange Rate Adjustments and the Balance-of-payments

Exchange Rate Systems and Currency Crises

Macroeconomic Policy in an Open-economy

International Banking: Reserves, Debt, and Risk

Filters