Learning Objective: 09-05 Understand the implications for business that are inherent in regional economic integration
agreements.
Topic: Implications for Managers
40.
The emerging role of the European Commission in competition policy
suggests the EU is increasingly willing and able to intervene and impose
conditions on companies proposing mergers and acquisitions.
TRUE
The emerging role of the European Commission in competition policy
suggests the EU is increasingly willing and able to intervene and impose
conditions on companies proposing mergers and acquisitions.
AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 09-05 Understand the implications for business that are inherent in regional economic integration
agreements.
Topic: Implications for Managers
Multiple Choice Questions
41.
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.
a free trade area, a customs union, a common market, an economic
union, and a political union.
C.
a customs union, a free trade area, a common market, a political union,
and an economic union.
D.
a common market, an economic union, a customs union, a free trade
area, and a political union.
Several levels of economic integration are possible in theory. From least
integrated to most integrated, they are a free trade area, a customs union, a
common market, an economic union, and, finally, a full political union.
AACSB: Analytic
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 09-01 Describe the different levels of regional economic integration.
Topic: Levels of Economic Integration
42.
Country X and Country Y reach an agreement to boost bilateral trade. They
agree to remove all barriers to the trade of goods and services. They,
however, are free to determine their own trade policies with regard to
nonmembers. Which level of economic integration is this an example of?
A.
A customs union
B.
C.
A common market
D.
A Free trade area
In a free trade area, all barriers to the trade of goods and services among
member countries are removed. Each country, however, is allowed to
determine its own trade policies with regard to nonmembers.
AACSB: Reflective Thinking
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 09-01 Describe the different levels of regional economic integration.
Topic: Levels of Economic Integration
43.
Which feature of a customs union differentiates it from a free trade area?
A.
Harmonization of members’ tax rates
B.
A common currency
C.
A common external trade policy toward nonmembers
D.
Ability of factors of production to move freely between members
A customs union eliminates trade barriers between member countries and
adopts a common external trade policy. Establishment of a common
external trade policy necessitates significant administrative machinery to
oversee trade relations with nonmembers.
AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 09-01 Describe the different levels of regional economic integration.
Topic: Levels of Economic Integration
44.
A _____ has no barriers to trade between member countries, includes a
common external trade policy, and allows factors of production to move
freely between members.
A.
common market
B.
customs union
C.
free trade area
D.
bonded market
A common market has no barriers to trade between member countries,
includes a common external trade policy, and allows factors of production to
move freely between members.
AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 09-01 Describe the different levels of regional economic integration.
Topic: Levels of Economic Integration
45.
Three countries agree to remove barriers to trade between member
countries and adopt a common external trade policy toward nonmembers.
They also agree to allow people and other factors of production to move
freely across their borders. Which level of economic integration is this an
example of?
A.
Bonded market
B.
Customs union
C.
Free trade area
D.
Common market
A common market has no barriers to trade between member countries,
includes a common external trade policy, and allows factors of production to
move freely between members.
AACSB: Reflective Thinking
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 09-01 Describe the different levels of regional economic integration.
Topic: Levels of Economic Integration
46.
Which feature of a common market differentiates it from a customs union?
A.
Harmonization of members’ tax rates
B.
A common currency
C.
A common external trade policy toward nonmembers
D.
Ability of factors of production to move freely between members
In a common market, labor and capital are free to move because there are
no restrictions on immigration, emigration, or cross-border flows of capital
between member countries. This is not possible in a customs union.
AACSB: Reflective Thinking
Blooms: Understand
Difficulty: 3 Hard
Learning Objective: 09-01 Describe the different levels of regional economic integration.
Topic: Levels of Economic Integration
47.
A(n) _____ 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.
economic union
B.
common market
C.
customs union
D.
free trade area
An economic union 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.
AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 09-01 Describe the different levels of regional economic integration.
Topic: Levels of Economic Integration
48.
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
An economic union involves a common currency, harmonization of
members’ tax rates, and a common monetary and fiscal policy. These are
AACSB: Reflective Thinking
Blooms: Understand
Difficulty: 3 Hard
Learning Objective: 09-01 Describe the different levels of regional economic integration.
Topic: Levels of Economic Integration
49.
Which of the following is a reason why the European Union is considered an
imperfect economic union?
A.
Factors of production are not allowed to move freely between member
countries.
B.
Not all members of the union have adopted the euro.
C.
Almost all markets are heavily regulated.
D.
Products and services are not allowed to move freely between member
countries.
The EU is an economic union, although an imperfect one because not all
members of the EU have adopted the euro, the currency of the EU;
differences in tax rates and regulations across countries still remain; and
some markets, such as the market for energy, are still not fully deregulated.
AACSB: Analytic
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 09-01 Describe the different levels of regional economic integration.
Topic: Levels of Economic Integration
50.
The move toward economic union raises the issue of how to make a
coordinating bureaucracy accountable to the citizens of member nations.
Which of the following offers a solution to this problem?
A.
A common market
B.
A free trade area
C.
A customs union
D.
A political union
The move toward economic union raises the issue of how to make a
coordinating bureaucracy accountable to the citizens of member nations.
The answer is through political union in which a central political apparatus
coordinates the economic, social, and foreign policy of the member states.
AACSB: Analytic
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 09-01 Describe the different levels of regional economic integration.
Topic: Levels of Economic Integration
51.
A political benefit of economic integration is that:
A.
it enables participants to achieve gains from the free flow of trade.
B.
it enables participants to achieve gains from the free flow of investment.
C.
it allow countries to specialize in the production of goods and services
that they can produce most efficiently.
D.
it creates reduces the potential for violent conflict.
Linking neighboring economies and making them increasingly dependent on
each other creates incentives for political cooperation between the
neighboring states and reduces the potential for violent conflict.
AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 09-02 Understand the economic and political arguments for regional economic integration.
Topic: The Case for Regional Integration
52.
Which of the following explains why economic integration has never been
easy to achieve or sustain, despite the strong economic and political
arguments in support?
A.
No country has shown significant improvement because of economic
integration.
B.
Countries fear a reduction of their political weight in the world because
of economic integration.
C.
Linking neighboring economies and making them increasingly dependent
on each other creates little incentives for political cooperation.
D.
While a nation as a whole may benefit significantly, certain groups may
lose.
Although economic integration aids the majority, it has its costs.
AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 09-02 Understand the economic and political arguments for regional economic integration.
Topic: The Case for Regional Integration
53.
_____ occurs when high-cost domestic producers are replaced by low-cost
producers within the free trade area.
A.
Trade deficit
B.
Trade diversion
C.
Trade creation
D.
Trade distortion
Trade creation occurs when high-cost domestic producers are replaced by
low-cost producers within the free trade area.
AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 09-03 Understand the economic and political arguments against regional economic integration.
Topic: The Case Against Regional Integration
54.
Which of the following occurs when lower-cost external suppliers are
replaced by higher-cost suppliers within the free trade area?
A.
Efficiency gain
B.
Trade diversion
C.
Trade deficit
D.
Trade creation
Trade diversion occurs when lower-cost external suppliers are replaced by
higher-cost suppliers within the free trade area. A regional free trade
agreement will benefit the world only if the amount of trade it creates
exceeds the amount it diverts.
AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 09-03 Understand the economic and political arguments against regional economic integration.
Topic: The Case Against Regional Integration
55.
Country A and Country B entered into a free trade agreement recently. After
this, Country A starts importing heavy machinery from Country B. Country A
used to previously import such machinery at lower rates from another
country. Which of the following has occurred in this scenario?
A.
Trade creation
B.
Efficiency gain
C.
Trade deficit
D.
Trade diversion
Trade diversion occurs when lower-cost external suppliers are replaced by
higher-cost suppliers within the free trade area.
AACSB: Reflective Thinking
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 09-03 Understand the economic and political arguments against regional economic integration.
Topic: The Case Against Regional Integration
56.
To ensure that a free trade agreement does not result in trade diversion,
which of the following has to come within the scope of WTO?
A.
Nontariff barriers
B.
Services
C.
Energy markets
D.
Tax rates
The only way to guard against the possibility of trade diversion is to
increase the scope of the WTO so it covers nontariff barriers to trade.
AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 09-03 Understand the economic and political arguments against regional economic integration.
Topic: The Case Against Regional Integration
57.
The European Community was established by:
A.
the Treaty of Rome signed in 1957.
B.
the Maastricht Treaty signed in 1991.
C.
the Maastricht Treaty of 1994.
D.
the Single European Act of 1987.
With the signing of the Treaty of Rome in 1957, the European Community
was established.
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 09-04 Explain the history; current scope; and future prospects of the world’s most important regional
economic agreements.
Topic: Regional Economic Integration in Europe
58.
The _____ is responsible for proposing EU legislation, implementing it, and
monitoring compliance with EU laws by member states.
A.
European Parliament
B.
European Commission
C.
Council of the European Union
D.
Court of Justice
The European Commission is responsible for proposing EU legislation,
implementing it, and monitoring compliance with EU laws by member
states.
AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 09-04 Explain the history; current scope; and future prospects of the world’s most important regional
economic agreements.
Topic: Regional Economic Integration in Europe
59.
Why is the European Council said to be the ultimate controlling authority
within the EU?
A.
Since it is responsible for implementing EU legislation and monitoring
compliance with EU laws by member states
B.
Since its role in setting competition policy is becoming increasingly
important to business
C.
Since it has the right to vote on the appointment of commissioners
D.
Since draft legislation from the commission can become EU law only if
the council agrees
The European Council represents the interests of member states. It is
clearly the ultimate controlling authority within the EU since draft legislation
from the commission can become EU law only if the council agrees.
AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 09-04 Explain the history; current scope; and future prospects of the world’s most important regional
economic agreements.
Topic: Regional Economic Integration in Europe
60.
Which of the following is directly elected by the populations of the member
states and is primarily a consultative rather than legislative body?
A.
The European Parliament
B.
The European Commission
C.
The Council of the European Union
D.
The Court of Justice
The European Parliament, which now has 732 members, is directly elected
by the populations of the member states. It debates legislation proposed by
the commission and forwarded to it by the council.
AACSB: Analytic
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 09-04 Explain the history; current scope; and future prospects of the world’s most important regional
economic agreements.
Topic: Regional Economic Integration in Europe