International Business: The Challenges of Globalization, 7e (Wild)
Chapter 8 Regional Economic Integration
1) Trade agreements allow competitors from other nations to enter the domestic market.
2) A group of nations in a geographic region undergoing economic integration is called a
regional trading bloc.
3) A common market area is the greatest extent of national integration.
4) In a free trade area, each country can maintain whatever policy it sees fit against nonmember
countries.
5) Countries belonging to a free trade area must concede a certain amount of their national
autonomy to the supranational union of which they are a part.
6) A common market requires that member nations create a common currency.
7) A political union makes it mandatory for nations to accept a common stance on all economic
and political policies within their territories.
8) Canada and the United States are early examples of political unions.
9) The increase in the level of trade between nations that results from regional economic
integration is called trade creation.
10) A result of trade creation is that buyers pay higher prices for imported goods and services
after trade barriers are removed.
11) The greatest benefit of regional integration is trade diversion.
12) Economic integration can unintentionally reward a less efficient producer within a trading
bloc.
13) When trade diversion occurs, buyers will likely pay less for products.
14) In regional economic integration, industries that require mostly unskilled labor tend to shift
production to low-wage nations within a trading bloc.
15) A benefit of regional economic integration is that it always expands employment
opportunities in all nations.
16) The least amount of sovereignty that must be surrendered to a trading block occurs in a
political union.
17) The Single European Act predominantly aimed at establishing common transportation
policies among the European Union members.
18) The Maastricht Treaty called for political union of the member nations.
19) Ombudsman and Data Protection Supervisor are the EU institutions that fulfill secondary and
support roles.
20) The Council of the European Union is the executive body of the EU.
21) The Court of Justice is the court of appeals of the European Union.
22) Like the European Union commissioners, EU justices are required to act in the interest of
their native countries.
23) The European Free Trade Association focuses on trade in consumer goods.
24) The European Union (EU) and European Free Trade Association (EFTA) created the
European Economic Area (EEA).
25) The North American Free Trade Agreement membership includes Canada, Mexico, and the
United States.
26) The Southern Common Market is also referred to as MERCOSUR.
27) Today, the Southern Common Market acts as a political union.
28) The main difficulty CARICOM will continue to face is that most members trade more with
nonmembers than they do with each other.
29) The stated aim of Asia Pacific Economic Cooperation (APEC) is to strengthen the
multilateral trading system.
30) The primary purpose of the Gulf Cooperation Council (GCC) at its formation was to create a
political union between Iraq and Iran.
31) The process whereby countries in a geographic area cooperate with one another to reduce or
eliminate barriers to the international flow of products, people, or capital is called ________.
A) regional economic integration
B) protectionism
C) mercantilism
D) economic nationalism
32) Regional economic integration is also referred to as ________.
A) mercantilism
B) nationalism
C) protectionism
D) regionalism
33) A group of nations in a geographic area undergoing economic integration is called a
________.
A) born global firm
B) maquiladora
C) regional trading bloc
D) Eurocurrency market
34) Which of the following is an important goal of regional economic integration?
A) to increase the selling prices of products
B) to raise the living standards of people
C) to limit the choice of products available to customers
D) to establish a socialist government
35) Which of the following is the lowest extent of regional economic integration?
A) free trade area
B) political union
C) common market
D) customs union
36) Which of the following is the greatest extent of regional economic integration?
A) free trade area
B) political union
C) common market
D) customs union
37) Economic integration whereby countries remove all barriers to trade among themselves, but
each country determines its own barriers against nonmembers, is called a(n) ________.
A) economic union
B) customs union
C) common market
D) free trade area
38) Countries belonging to a ________ maintain whatever policies they see fit against
nonmember countries.
A) economic union
B) customs union
C) common market
D) free trade area
39) Economic integration whereby countries remove all barriers to trade among themselves, but
set a common trade policy against nonmembers is called a(n) ________.
A) preferential trade area
B) customs union
C) economic nationalism
D) free trade area
40) The main difference between a free trade area and a customs union is that the members of a
customs union ________.
A) agree to the free movement of all factors of production
B) harmonize their tax, monetary, and fiscal policies and create a common currency
C) agree to treat trade with all nonmember nations in a similar manner
D) accept a common stance on economic and political policies regarding nonmember nations
41) Economic integration whereby countries remove all barriers to trade and the movement of
labor and capital between themselves and set a common trade policy against nonmembers is
called a ________.
A) free trade area
B) customs union
C) common market
D) preferential trade area
42) Economic integration whereby countries remove barriers to trade and the movement of labor
and capital among members, set a common trade policy against nonmembers, and coordinate
their economic policies is called a(n) ________.
A) customs union
B) common market
C) economic union
D) free trade area
43) A(n) ________ requires member nations to harmonize their tax, monetary, and fiscal policies
and create a common currency.
A) customs union
B) economic union
C) free trade area
D) common market
44) ________ require that member countries concede a certain amount of their national
autonomy to the supranational union of which they are a part.
A) Free trade areas
B) Customs unions
C) Economic unions
D) Preferential trade areas
45) Higher levels of trade between nations result in ________.
A) higher product prices
B) lesser specialization
C) greater purchasing power
D) trade diversion
46) An increase in the level of trade among nations that results from regional economic
integration is called ________.
A) trade diversion
B) mercantilism
C) trade creation
D) economic nationalism
47) Which of the following is a result of trade creation?
A) The demand for goods tends to increase.
B) Purchasing power of consumers decreases.
C) Consumers have a limited choice for selection of goods.
D) Imported goods are seldom available at lower prices.
48) Which of the following is a potential drawback of regional economic integration?
A) ethnocentricity
B) trade diversion
C) economic nationalism
D) protectionism
49) Which of the following is true of trade diversion?
A) It increases the purchasing power of consumers.
B) It increases the level of trade between nonmember nations.
C) It generally increases the prices of products in a nation.
D) It guarantees consumers a wider selection of goods.
50) The least amount of sovereignty that must be surrendered to a trading bloc occurs in a
________.
A) economic union
B) common market
C) free trade area
D) political union
51) Currently the most sophisticated and advanced example of regional integration is occurring
in ________.
A) Asia
B) Europe
C) North America
D) Africa
52) In 1951, Belgium, France, West Germany, Italy, Luxembourg, and the Netherlands signed
the Treaty of Paris and created the ________.
A) European Union
B) European Economic Community
C) European Coal and Steel Community
D) European Community
53) Which of the following treaties was signed by the members of the European Coal and Steel
Community in 1957 for creating the European Economic Community?
A) the Treaty of Rome
B) the Maastricht Treaty
C) the Treaty of Paris
D) the Treaty of Versailles
54) Which of the following materialized the EU’s goals of removing trade barriers, increasing
harmonization, and enhancing the competitiveness of European companies?
A) the Maastricht Treaty
B) the European monetary union
C) the Single European Act
D) the Copenhagen Criteria
55) The ________ called for banking in a single common currency, setting up of monetary and
fiscal targets, and political union of the European Union members.
A) Maastricht Treaty
B) European monetary union
C) Single European Act
D) Copenhagen Criteria
56) The European Union plan that established its own central bank and currency in January 1999
is known as the ________.
A) Single European Act
B) European monetary union
C) Copenhagen Criteria
D) Southern Common Market
57) The common currency of the European Union is known as the ________.
A) European currency unit
B) eurodollar
C) euro
D) European unit of account
58) Which of the following is true of the euro?
A) It increases exchange-rate risk for business deals between member nations.
B) It increases transaction costs.
C) It makes prices between markets more transparent.
D) It is not accepted among merchants in France, Germany, and Italy.
59) Which of the following countries has been facing difficulties in negotiations regarding its
application for European Union membership?
A) Bulgaria
B) Czech Republic
C) Romania
D) Turkey
60) For countries to become members of the European Union, they have to meet certain demands
laid down by the EU referred to as the ________.
A) Copenhagen Criteria
B) Closer Economic Relations Agreement
C) Andean Community
D) Euro-Plus Pact
61) Which of the following institutions is least likely to play an important role in monitoring and
enforcing economic and political integration in the European Union?
A) European Parliament
B) Council of the European Union
C) European Court of Human Rights
D) European Commission
62) The main purpose of the ________ is to debate and amend legislation proposed by the
European Commission of the EU.
A) European Parliament
B) Council of the European Union
C) Court of Auditors
D) Court of Justice
63) The Council of the European Union is the ________ body of the European Union.
A) legislative
B) executive
C) judicial
D) monitoring
64) No proposed legislation becomes EU law unless the ________ votes it into law.
A) Council of the European Union
B) European Parliament
C) Court of Auditors
D) European Commission
65) The European Commission is the ________ body of the European Union.
A) legislative
B) executive
C) financial
D) monitoring
66) The Court of Justice is the ________ of the European Union.
A) court of honor
B) court of appeals
C) small-claims court
D) arbitral tribunal
67) The European Free Trade Association was formed in 1960 to focus on trade in ________.
A) consumer goods
B) agricultural goods
C) industrial goods
D) services
68) Which of the following is currently a member of the European Free Trade Association?
A) Slovakia
B) Ireland
C) Norway
D) Italy
69) While ________ encourages free trade among Canada, Mexico and the United States,
manufacturers and distributors must abide by local content requirements and rules of origin.
A) NAFTA
B) LAFTA
C) CAN
D) CAFTA-DR
70) Which of the following countries is a member of the North American Free Trade Agreement
(NAFTA)?
A) Costa Rica
B) Honduras
C) Venezuela
D) Canada
71) Which of the following statements is true of NAFTA?
A) It introduced a common currency for trade between the U.S., Mexico and Canada.
B) It overrode the local content requirements and rules of origin for products manufactured in the
member nations.
C) It eliminated all tariffs and nontariff trade barriers on goods originating from within North
America.
D) It called for stringent rules regarding government procurement practices and the imposition of
countervailing duties.
72) The ________ was established in 2006 between the United States and Costa Rica, El
Salvador, Guatemala, Honduras, Nicaragua, and later the Dominican Republic.
A) NAFTA
B) LAFTA
C) CAFTA-DR
D) CAN
73) The main objectives of the Andean Community include ________.
A) introduction of tariffs for trade among member countries
B) separate policies in both transportation and certain industries
C) a common external tariff
D) a common currency
74) Which of the following is best classified as an economic union?
A) Southern Common Market (MERCOSUR)
B) European Union (EU)
C) North American Free Trade Agreement (NAFTA)
D) Andean Community
75) In today’s world, the Andean Community is best described as an incomplete ________.
A) free-trade area
B) customs union
C) economic union
D) political union
76) ALADI refers to the ________.
A) Latin American Integration Association
B) Association of Southeast Asian Nations
C) Asia Pacific Economic Cooperation
D) Latin American Free Trade Association
77) Today, the Southern Common Market (MERCOSUR) acts as a(n) ________.
A) economic union
B) political union
C) customs union
D) preferential trading area