Question 1

World welfare under a customs union

Accepted Answer

A)  Increases due to a trade creation effect 
B)  Decreases due to a trade diversion effect 
C)  Depends on the relative strength of the trade creation effect and the trade diversion effect 
D)  All of the above 
A)  Increases due to a trade creation effect 
B)  Decreases due to a trade diversion effect 
C)  Depends on the relative strength of the trade creation effect and the trade diversion effect 
D)  All of the above

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 SS1U1B1GS1U1B0 and DS1U1B1GS1U1B0.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 3

According to the theory of optimum currency areas,a currency area has the least chance for success when:

Accepted Answer

A)  Countries of the currency area have differing business cycles 
B)  Workers have a high degree of mobility across borders of the currency area 
C)  Prices and wages can be adjusted in response to economic disturbances 
D)  A single monetary policy affects all member countries in the same manner 
A)  Countries of the currency area have differing business cycles 
B)  Workers have a high degree of mobility across borders of the currency area 
C)  Prices and wages can be adjusted in response to economic disturbances 
D)  A single monetary policy affects all member countries in the same manner

Question 4

Figure 8.2.Portugal's Steel Market  
-Consider Figure 8.2.With free trade,Portugal produces 15 tons of steel,consumes 30 tons of steel,and imports 15 tons of steel.

Accepted Answer

A) True 
 B)False

Question 5

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 6

Suppose that steel from Japan faces a 20 percent tariff in France and a 25 percent tariff in Italy,while France and Italy maintain free trade between each other.France and Italy are therefore part of a (an):

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

Question 7

The highest stage of economic integration is a monetary union.

Accepted Answer

A) True 
 B)False

Question 8

Negotiating the North American Free Trade Agreement was relatively easy since it involved meshing two large industrial countries with a developing country.

Accepted Answer

A) True 
 B)False

Question 9

Which nation is not a member of the North American Free Trade Association?

Accepted Answer

A)  Canada 
B)  Greenland 
C)  Mexico 
D)  United States 
A)  Canada 
B)  Greenland 
C)  Mexico 
D)  United States

Question 10

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 SS1U1B1GS1U1B0 and DS1U1B1GS1U1B0.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.The value of the trade creation effect,resulting from the Greece/France customs union,equals:

Accepted Answer

A)  $5 
B)  $10 
C)  $15 
D)  $20 
A)  $5 
B)  $10 
C)  $15 
D)  $20

World welfare under a customs union

According to the theory of optimum currency areas,a currency area has the least chance for success when:

Figure 8.2.Portugal's Steel Market -Consider Figure 8.2.With free trade,Portugal produces 15 tons of steel,consumes 30 tons of steel,and imports 15 tons of steel.

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.

Suppose that steel from Japan faces a 20 percent tariff in France and a 25 percent tariff in Italy,while France and Italy maintain free trade between each other.France and Italy are therefore part of a (an):

The highest stage of economic integration is a monetary union.

Negotiating the North American Free Trade Agreement was relatively easy since it involved meshing two large industrial countries with a developing country.

Which nation is not a member of the North American Free Trade Association?

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

World welfare under a customs union

According to the theory of optimum currency areas,a currency area has the least chance for success when:

Figure 8.2.Portugal's Steel Market -Consider Figure 8.2.With free trade,Portugal produces 15 tons of steel,consumes 30 tons of steel,and imports 15 tons of steel.

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.

Suppose that steel from Japan faces a 20 percent tariff in France and a 25 percent tariff in Italy,while France and Italy maintain free trade between each other.France and Italy are therefore part of a (an):

The highest stage of economic integration is a monetary union.

Negotiating the North American Free Trade Agreement was relatively easy since it involved meshing two large industrial countries with a developing country.

Which nation is not a member of the North American Free Trade Association?

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