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International Business, 12e (Hill)
1) Charlyce lives in a country where there are no barriers to the trade of goods and services. This is
called a free trade area.
2) In a customs union, trade barriers are eliminated among member countries, and each country
maintains its own external trade policies.
3) The European Union is an example of a perfect economic union.
4) Coordination and policy harmonization problems are largely a function of the number of
countries that seek agreement.
5) Because of the fact that everyone benefits from economic integration, it is easy to achieve and
sustain.
6) Concerns about national sovereignty in the EU have been a major impediment to economic
integration.
7) A regional free trade agreement will benefit the world only when the amount of trade it creates
exceeds the amount of trade it diverts.
8) The Treaty of Rome, signed in 1957, established the European Free Trade Association.
9) A central reason for the establishment of the EU was the devastation of Western Europe during
two world wars and the desire for a lasting peace.
10) The Council of the European Union is responsible for proposing EU legislation, implementing
it, and monitoring compliance with EU laws by member states.
11) The judges of the European Court of Justice are required to act as representatives of national
interests, rather than as independent officials.
12) The Single European Act committed EU countries to adopting a common currency by January
1, 1999.
13) Establishment of the euro created the largest currency zone in the world, replacing the position
the U.S. dollar had held for decades.
14) A key benefit resulting from the adoption of the euro is the ability to compare prices across
member markets.
15) The implied loss of national sovereignty to the European Central Bank (ECB) underlies the
decision by Great Britain, Denmark, and Sweden to stay out of the euro zone for now.
16) Since its establishment, the euro has had a stable trading history.
17) The Andean Pact is a highly successful common market modeled after the EU.
18) Political turmoil in several African nations has persistently impeded any meaningful progress
in economic integration.
19) A benefit to companies of economic integration is the opportunity to centralize their
production and reduce costs.
20) Once the barriers to trade and investment are removed, companies are able to realize cost
economies by centralizing production in key locations and producing a standardized product for a
single multiple-country market.
21) From least integrated to most integrated, the levels of economic integration are a:
A) common market, a free trade area, an economic union, a customs union, and a political union.
B) free trade area, a customs union, a common market, an economic union, and a political union.
C) customs union, a free trade area, a common market, a political union, and an economic union.
D) common market, an economic union, a customs union, a free trade area, and a political union.
22) Which level of economic integration eliminates trade barriers between member countries and
adopts a common external trade policy?
A) political union
B) customs union
C) common market
D) economic union
23) Which feature of a common market differentiates it from a customs union?
A) requires harmonization of members' tax rates
B) has a common currency
C) holds a common external trade policy toward nonmembers
D) allows factors of production to move freely among members
24) ________ involves the free flow of products and factors of production between member
countries, the adoption of a common external trade policy, a common currency, harmonization of
members' tax rates, and a common monetary and fiscal policy.
A) An economic union
B) A common market
C) A customs union
D) A free trade area
25) Which is the most enduring free trade area in the world?
A) Central America Free Trade Association (CAFTA)
B) European Free Trade Association (EFTA)
C) Association of Southeast Asian Nations (ASEAN)
D) North American Free Trade Association (NAFTA)
26) Which feature of an economic union differentiates it from a common market?
A) Free flow of products and factors of production between member countries
B) a common monetary and fiscal policy
C) a common external trade policy toward nonmembers
D) ability of factors of production to move freely between members
