1. The European Union is primarily intended to permit:
a.
Countries to adopt scientific tariffs on imports
b.
An agricultural commodity cartel within the group
c.
The adoption of export tariffs for revenue purposes
d.
Free movement of resources and products among member nations
2. Which of the following represents the stage where economic integration is most complete?
a.
Economic union
b.
Customs union
c.
Monetary union
d.
Common market
United States – BPROG: Reflective Thinking – BPROG: Analysis
Types of Regional Trading Arrangements
BLOOM’S: Knowledge
3. Which of the following represents the stage where economic integration is least complete?
a.
Free trade area
b.
Monetary union
c.
Common market
d.
Customs union
United States – BPROG: Reflective Thinking – BPROG: Analysis
Types of Regional Trading Arrangements
BLOOM’S: Knowledge
4. Customs union theory reasons that the formation of a customs union will decrease members’ real welfare when the:
a.
Trade diversion effect exceeds the trade creation effect
b.
Trade production effect exceeds the trade consumption effect
c.
Trade consumption effect exceeds the trade production effect
United States – BPROG: Reflective Thinking – BPROG: Analysis
Types of Regional Trading Arrangements
BLOOM’S: Knowledge
d.
Trade creation effect exceeds the trade diversion effect
5. Which economic integration scheme is solely intended to abolish trade restrictions among member countries, while
setting up common tariffs against nonmembers?
a.
Economic union
b.
Common market
c.
Free trade area
d.
Customs union
United States – BPROG: Reflective Thinking – BPROG: Analysis
Types of Regional Trading Arrangements
BLOOM’S: Knowledge
6. By 1992 the European Union had become a full-fledged:
a.
Economic union
b.
Monetary union
c.
Common market
d.
Fiscal union
United States – BPROG: Reflective Thinking – BPROG: Analysis
Types of Regional Trading Arrangements
BLOOM’S: Knowledge
7. 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?
a.
Variable levies
b.
Import quotas
c.
Import subsidies
d.
Domestic content regulations
United States – BPROG: Reflective Thinking – BPROG: Analysis
Types of Regional Trading Arrangements
BLOOM’S: Comprehension
8. 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?
a.
b.
c.
d.
Moderate
United States – BPROG: Reflective Thinking – BPROG: Analysis
The European Union
BLOOM’S: Knowledge
9. Assume that the formation of a customs union turns out to include the lowest-cost world producer of the product in
question. Which effect could not occur for the participating countries?
a.
Trade creation-production effect
b.
Trade creation-consumption effect
c.
Trade diversion
d.
Scale economies and competition
c
Moderate
United States – BPROG: Reflective Thinking – BPROG: Analysis
Effects of a Regional Trading Arrangement
BLOOM’S: Comprehension
10. Which organization of nations permits free trade among its members in industrial goods, while each member
maintains freedom in its trade policies toward non-member countries?
a.
European Union
b.
Benelux
c.
Council for Mutual Economic Assistance
d.
North American Free Trade Association
Moderate
United States – BPROG: Reflective Thinking – BPROG: Analysis
Easy
United States – BPROG: Reflective Thinking – BPROG: Analysis
The European Union
BLOOM’S: Knowledge
11. Which of the following organizations is considered a regional trading arrangement?
a.
Organization of Petroleum Exporting Countries
b.
North Atlantic Treaty Organization
c.
Benelux
d.
International Tin Agreement
c
Moderate
United States – BPROG: Reflective Thinking – BPROG: Analysis
Types of Regional Trading Arrangements
BLOOM’S: Knowledge
12. When products from high-cost suppliers within a customs union replace imports from a low-cost nation that is not a
member of the customs union, there exist(s):
a.
Dynamic welfare losses
b.
Dynamic welfare gains
c.
Trade creation
d.
Trade diversion
Moderate
United States – BPROG: Reflective Thinking – BPROG: Analysis
Effects of a Regional Trading Arrangement
BLOOM’S: Comprehension
13. Which form of economic integration occurs when participating countries abolish tariffs on trade among themselves,
establish a common tariff on imports from nonmembers, and permit free movement of capital and labor within the
organization?
a.
Free trade area
b.
Economic union
c.
Common market
d.
Monetary union
c
Easy
United States – BPROG: Reflective Thinking – BPROG: Analysis
Finance
Types of Regional Trading Arrangements
BLOOM’S: Knowledge
14. A static welfare effect resulting from the formation of the European Union would be:
a.
Economies of scale
b.
Trade diversion
c.
Investment incentives
d.
Increased competition
United States – BPROG: Reflective Thinking – BPROG: Analysis
Effects of a Regional Trading Arrangement
BLOOM’S: Comprehension
15. A dynamic welfare gain resulting from the formation of the European Union would be:
a.
Trade diversion
b.
Trade creation
c.
Diseconomies of scale
d.
Economies of scale
United States – BPROG: Reflective Thinking – BPROG: Analysis
Effects of a Regional Trading Arrangement
BLOOM’S: Comprehension
16. Which organization was founded in 1957 whose objective was to create an economic union among its members?
a.
General Agreements on Tariffs and Trade
b.
Organization of Economic Cooperation and Development
c.
European Union
d.
Latin American Free Trade Association
United States – BPROG: Reflective Thinking – BPROG: Analysis
The European Union
BLOOM’S: Knowledge
17. The common agriculture policy of the European Union has supported European farmers via:
Types of Regional Trading Arrangements
BLOOM’S: Knowledge
a.
Export tariffs and domestic content regulations
b.
Variable levies and voluntary export agreements
c.
Content regulations and export subsidies
d.
Export subsidies and variable levies
18. Which nation is not a member of the North American Free Trade Association?
a.
Canada
b.
Greenland
c.
Mexico
d.
United States
Easy
United States – BPROG: Reflective Thinking – BPROG: Analysis
BLOOM’S: Knowledge
19. NAFTA is a:
a.
Monetary union
b.
Free trade area
c.
Common market
d.
Customs union
Easy
United States – BPROG: Reflective Thinking – BPROG: Analysis
Finance
North American Free Trade Agreement
BLOOM’S: Knowledge
20. Under the European Union’s common agricultural policy, a variable import levy equals the:
a.
Amount by which the EU’s support price exceeds the world price
b.
Amount by which the world price exceeds the EU’s support price
c.
Support price of the EU
d.
World price
Moderate
United States – BPROG: Reflective Thinking – BPROG: Analysis
The European Union
BLOOM’S: Knowledge
21. Members of the European Union find that “trade creation” is fostered when their economies are:
a.
Highly competitive
b.
Highly noncompetitive
c.
Small in economic importance
d.
Geographically distant
United States – BPROG: Reflective Thinking – BPROG: Analysis
The European Union
BLOOM’S: Comprehension
22. The European Union has achieved all of the following except:
a.
Adopted a common fiscal policy for member nations
b.
Established a common system of agricultural price supports
c.
Disbanded all tariffs among its member countries
d.
Levied common tariffs on products imported from nonmembers
United States – BPROG: Reflective Thinking – BPROG: Analysis
The European Union
BLOOM’S: Knowledge
23. 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.
a.
Trade diversion occurs
b.
Trade creation occurs
c.
World welfare rises
d.
World welfare falls to zero
United States – BPROG: Reflective Thinking – BPROG: Analysis
BLOOM’S: Knowledge
24. When the formation of a free trade area results in the reduction of trade with nonmember nations in favor of member
countries, ____ occurs.
a.
Trade devaluation
b.
Trade revaluation
c.
Trade creation
d.
Trade diversion
Moderate
United States – BPROG: Reflective Thinking – BPROG: Analysis
Finance
Types of Regional Trading Arrangements
BLOOM’S: Comprehension
25. Which country is not a member of the European Union?
a.
Spain
b.
Germany
c.
France
d.
Iceland
Moderate
United States – BPROG: Reflective Thinking – BPROG: Analysis
Finance
The European Union
BLOOM’S: Knowledge
26. The implementation of the European Union has:
a.
Made it harder for Americans to compete against the Germans in the British market
b.
Made it easier for Americans to compete against the Germans in the British market
c.
Made it harder for Americans to compete against the Japanese in the British market
d.
Made it easier for Americans to compete against the Japanese in the British market
a
United States – BPROG: Reflective Thinking – BPROG: Analysis
The European Union
United States – BPROG: Reflective Thinking – BPROG: Analysis
Finance
North American Free Trade Agreement
BLOOM’S: Comprehension
27. The common agricultural policy of the European Union has:
a.
Increased American farm exports to the EU
b.
Decreased American farm exports to the EU
c.
Lowered the price of American farm exports to the EU
d.
Not affected the price of American farm exports to the EU
Moderate
United States – BPROG: Reflective Thinking – BPROG: Analysis
The European Union
BLOOM’S: Knowledge
28. The implementation of a common market involves all of the following except:
a.
Elimination of trade restrictions among member countries
b.
A common tax system and monetary union
c.
Prohibition of restrictions on factor movements
d.
A common tariff levied in imports from nonmembers
Moderate
Finance
The European Union
BLOOM’S: Comprehension
29. Under the common agricultural policy, exports of any surplus quantities of EU produce are encouraged through the
usage of:
a.
Variable levies
b.
Export subsidies
c.
Import quotas
d.
Countertrade
Moderate
United States – BPROG: Reflective Thinking – BPROG: Analysis
BLOOM’S: Comprehension
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
BLOOM’S: Comprehension
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
30. Consider Figure 8.1. With free trade, Greece imports:
a.
3 calculators from France
b.
5 calculators from France
c.
3 calculators from Germany
d.
5 calculators from Germany
31. Consider to Figure 8.1. Assume Greece levies a per-unit tariff of $20 on imports from both Germany and France.
Greece will import:
a.
1 calculator from Germany
b.
1 calculator from France
c.
3 calculators from Germany
d.
3 calculators from France
United States – BPROG: Analytic
United States – BPROG: Analytic
BLOOM’S: Analysis
32. Consider Figure 8.1. Assume Greece levies a per-unit tariff of $20 on imports from both Germany and France.
As a result of the $20 tariff, Greece’s consumer surplus falls by:
a.
$90
b.
$100
c.
$110
d.
$120
United States – BPROG: Analytic
Effects of a Regional Trading Arrangement
BLOOM’S: Analysis
33. Consider Figure 8.1. Assume Greece levies a per-unit tariff of $20 on imports from both Germany and France.
The deadweight welfare loss to Greece, resulting from the $20 tariff, equals:
a.
$20
b.
$40
c.
$60
d.
$80
United States – BPROG: Analytic
Effects of a Regional Trading Arrangement
BLOOM’S: Analysis
34. Referring to Figure 8.1, suppose Greece forms a customs union with France. Greece will import:
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
United States – BPROG: Analytic
Effects of a Regional Trading Arrangement
Effects of a Regional Trading Arrangement
BLOOM’S: Analysis
35. Consider Figure 8.1. The value of the trade diversion effect, resulting from the Greece/France customs union, equals:
a.
$5
b.
$10
c.
$15
d.
$20
United States – BPROG: Analytic
The European Union
BLOOM’S: Analysis
36. Consider Figure 8.1. The value of the trade creation effect, resulting from the Greece/France customs union, equals:
a.
$5
b.
$10
c.
$15
d.
$20
Effects of a Regional Trading Arrangement
BLOOM’S: Analysis
37. 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:
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
United States – BPROG: Analytic
BLOOM’S: Analysis
38. Consider Figure 8.1. Suppose Greece had formed a customs union with Germany, rather than France. The value of the
trade diversion effect would be:
BLOOM’S: Analysis
a.
Zero
b.
$5
c.
$10
d.
$15
39. According to Figure 8.1, the formation of a Greece/Germany customs union would result in:
a.
$20 of trade diversion
b.
$40 of trade diversion
c.
$20 of trade creation
d.
$40 of trade creation
Challenging
United States – BPROG: Analytic
BLOOM’S: Analysis
40. In 1989 Canada and the United States agreed to implement a (an) ____ over a ten year period.
a.
Customs union
b.
Common market
c.
Free trade area
d.
Economic union
c
Moderate
United States – BPROG: Reflective Thinking – BPROG: Analysis
Finance
Types of Regional Trading Arrangements
BLOOM’S: Knowledge
41. In the United States, the proposed North American Free Trade Agreement was generally supported by:
a.
Labor unions
b.
Electronics firms
c.
Environmentalists
d.
Citrus producers
a
Challenging
United States – BPROG: Analytic
Effects of a Regional Trading Arrangement
BLOOM’S: Analysis
42. At the Maastricht Summit of 1991, European Union negotiators called for the pursuit of a:
a.
Free trade area
b.
Customs union
c.
Common market
d.
Monetary union
United States – BPROG: Reflective Thinking – BPROG: Analysis
United States – PA – DESC: International Trade and Fi – DESC: International Trade and
The European Union
BLOOM’S: Knowledge
43. By removing discriminatory government procurement laws within the European Union, member nations hoped to
benefit from all of the following except:
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
United States – BPROG: Reflective Thinking – BPROG: Analysis
United States – PA – DESC: International Trade and Fi – DESC: International Trade and
The European Union
BLOOM’S: Comprehension
44. Suppose that government procurement liberalization results in the U.K. government importing automobiles from
Germany, the low-cost EU manufacturer. Cost savings could result from all of the following except:
a.
Competition effect
b.
Scale-economy effect
c.
Protective effect
d.
Trade effect
United States – BPROG: Reflective Thinking – BPROG: Analysis
United States – PA – DESC: International Trade and Fi – DESC: International Trade and
BLOOM’S: Knowledge
45. 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):
a.
Free trade area
b.
Customs union
c.
Common market
d.
Economic union
United States – BPROG: Reflective Thinking – BPROG: Analysis
Types of Regional Trading Arrangements
BLOOM’S: Comprehension
46. Suppose that Mexico and Canada form a free-trade area and Canada begins importing steel from Mexico rather than
from Germany. There occurs:
a.
Trade diversion
b.
Trade creation
c.
Trade destruction
d.
Trade exhaustion
United States – BPROG: Reflective Thinking – BPROG: Analysis
Types of Regional Trading Arrangements
BLOOM’S: Knowledge
47. Suppose that Mexico and Canada form a free-trade area. Mexicans then decrease auto manufacturing and increase
imports of autos from Canada, while the Canadians decrease computer production and import more computers from
Mexico. This is an example of:
a.
Trade diversion
b.
Trade creation
c.
Trade destruction
d.
Trade exhaustion
United States – BPROG: Reflective Thinking – BPROG: Analysis
The European Union
BLOOM’S: Knowledge
48. If the United States and Canada abolish all tariffs on each other’s goods and implement a common tariff on goods
imported from other countries, there occurs a (an):
a.
Free-trade area
b.
Customs union
c.
Common market
d.
Economic union
Moderate
United States – BPROG: Reflective Thinking – BPROG: Analysis
Finance
Types of Regional Trading Arrangements
BLOOM’S: Comprehension
49. 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):
a.
Free-trade area
b.
Customs union
c.
Common market
d.
Economic union
c
Moderate
United States – BPROG: Reflective Thinking – BPROG: Analysis
Types of Regional Trading Arrangements
BLOOM’S: Comprehension
50. The North American Free Trade Agreement was expected to benefit ____ the most.
a.
Canada
b.
Mexico
c.
Greenland
d.
United States
Easy
United States – BPROG: Reflective Thinking – BPROG: Analysis
United States – PA – DESC: International Trade and Fi – DESC: International Trade and
United States – BPROG: Reflective Thinking – BPROG: Analysis
Finance
Types of Regional Trading Arrangements
BLOOM’S: Comprehension
51. The North American Free-Trade Agreement was most strongly opposed by U.S.:
a.
Electronics manufacturers
b.
Labor unions
c.
Commercial banks
d.
Engineering companies
United States – BPROG: Reflective Thinking – BPROG: Analysis
North American Free Trade Agreement
BLOOM’S: Knowledge
52. In the United States, which group was most likely to be hurt by the North American Free Trade Agreement?
a.
Unskilled labor
b.
Skilled labor
c.
Owners of capital equipment
d.
Owners of financial capital
United States – BPROG: Reflective Thinking – BPROG: Analysis
Types of Regional Trading Arrangements
BLOOM’S: Comprehension
53. By joining NAFTA, the United States, Canada, and Mexico would find their short-run welfare decreasing due to the:
a.
Economies of scale effect
b.
Business investment effect
c.
Trade creation effect
d.
Trade diversion effect
United States – BPROG: Reflective Thinking – BPROG: Analysis
North American Free Trade Agreement
BLOOM’S: Comprehension
North American Free Trade Agreement
BLOOM’S: Knowledge
54. When Mexico became a part of NAFTA, along with Canada and the United States, it:
a.
Eliminated tariffs against Canada and the United States but maintained them against nonmembers
b.
Eliminated tariffs against Canada, the United States, and all nonmember countries
c.
Increased tariffs against Canada the United States, and all nonmember countries
d.
Increased tariffs against Canada and the United States, but did not change them against nonmember countries
55. Among the benefits that a regional trading arrangement can provide are all of these EXCEPT:
a.
economies of large scale production
b.
specialization fostering
c.
attracting foreign investment
d.
a shorter production time
d
1
Moderate
United States – BPROG: Reflective Thinking – BPROG: Analysis
Impetus for Regionalism
BLOOM’S: Knowledge
56. Regarding the benefits of regional trade agreements, which of the following is NOT a benefit?
a.
regional trade agreements may help manage immigration flows
b.
regional trade agreements promote regional security
c.
regional trade agreements may help lock in policy shifts towards market oriented reform
d.
regional trade agreements may promote democracy
d
1
Moderate
United States – BPROG: Reflective Thinking – BPROG: Analysis
Impetus for Regionalism
BLOOM’S: Comprehension
57. 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:
a.
WTO
b.
GATT
c.
NAFTA
a
Moderate
United States – BPROG: Reflective Thinking – BPROG: Analysis
North American Free Trade Agreement
BLOOM’S: Comprehension
d.
none of these
58. As new regional trading arrangements are formed, the opportunity cost of remaining outside:
a.
increases
b.
decreases
c.
remains stable
d.
none of these
a
Moderate
United States – BPROG: Reflective Thinking – BPROG: Analysis
Impetus for Regionalism
BLOOM’S: Comprehension
59. Regarding the interests of a nonmember nation of a regional trading agreement:
a.
the exporting interests of the nonmember nation outweigh its import competing interests
b.
the import competing interests of the nonmember nation outweigh its exporting interests
c.
the nonmember nation will have a better negotiating position
d.
the nonmember nation has no interest in the regional trading arrangement
a
Challenging
United States – BPROG: Reflective Thinking – BPROG: Analysis
Impetus for Regionalism
BLOOM’S: Comprehension
60. The WTO’s efforts to promote trade liberalization globally:
a.
have become easier
b.
have become more difficult
c.
have remained stable
d.
none of these is correct
Easy
c
Moderate
United States – BPROG: Reflective Thinking – BPROG: Analysis
Impetus for Regionalism
BLOOM’S: Comprehension
61. All of the following are factors mitigating against global trade liberalization EXCEPT:
a.
regional trading arrangements may limit trade liberalization with outsiders
b.
a small nation might do better entering into a pact with a larger nation, rather than competing globally
c.
trading bloc members may not realize economies of scale through global liberalization
d.
trading bloc members prefer competing globally rather than locally
United States – BPROG: Reflective Thinking – BPROG: Analysis
Regional Integration Versus Multilateralism
BLOOM’S: Analysis
62. Regarding a common market, which of the following is true?
a.
permits the free movement of goods and service among members
b.
exercises common external trade restrictions against outsiders
c.
represents a more complete integration of member nations than a customs union
d.
all of these are true
United States – BPROG: Reflective Thinking – BPROG: Analysis
Transition Economies
BLOOM’S: Knowledge
63. The United States serves as an example of:
a.
a common market
b.
a common union
c.
a monetary union
d.
a free trade area
United States – BPROG: Reflective Thinking – BPROG: Analysis
Types of Regional Trading Agreements
United States – BPROG: Reflective Thinking – BPROG: Analysis
Regional Integration Versus Multilateralism
BLOOM’S: Comprehension