Exam 8: Regional Trading Arrangements

The North American Free Trade Agreement was expected to provide proportionately smaller benefits to Mexico than to the United States or Canada.

Smaller nations may seek safe haven trading arrangements with larger nations when future access to that market seems uncertain.This was reason for the formation of:

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):

In the United States,the proposed North American Free Trade Agreement was generally supported by:

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

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:

By the mid-1990s,the European Union had essentially achieved the common market stage of economic integration.

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.

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 the United States.As a result,Canada realizes:

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?

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

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 S_G and D_G.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 -According to Figure 8.1,the formation of a Greece/Germany customs union would result in:

The United States serves as an example of:

A common market

For countries forming a customs union,the trade-creation effect represents a welfare loss and the trade-diversion effect represents a welfare gain.

Trade creation occurs when imports from a low-cost supplier outside of a customs union are replaced by purchases from a higher-cost supplier within the union.

Regarding a common market,which of the following is true?

Suppose that Mexico and Canada form a free-trade area.The Mexicans then decrease refrigerator manufacturing and increase imports of refrigerators from Canada,while the Canadians decrease auto manufacturing and import more autos from Mexico.This is an example of trade creation.

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

Regarding the interests of a nonmember nation of a regional trading agreement: