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regional trading arrangements MCQs

Practise focused regional trading arrangements questions with marked answers for exam preparation and subject revision.

regional trading arrangements Mcqs
1. When several countries jointly impose common external tariffs, eliminate tariffs on each other, and eliminate barriers to the movement of labor and capital among themselves, they have formed a/na ?
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A. customs union

B. economic union

C. free trade area

D. common market
2. The European Union has achieved all of the following except ?
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A. levied common tariffs on products imported from nonmembers

B. adopted a common fiscal policy for member nations

C. disbanded all tariffs between its member countries

D. established a common system of agricultural price supports

3. The European Monetary Union is an example of a ?
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A. customs union

B. free trade area

C. reciprocal trade agreement

D. monetary union
4. The European Union is an example of a/an ?
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A. economic union

B. free trade area

C. common market

D. customs union

5. Which factor of production in the United States is most likely to be made worse off (its factor payment will decrease) because of the North American Free Trade Agreement ?
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A. land

B. skilled labor

C. unskilled labor

D. Capital

6. If A imposes a per unit tariff of $10 on imports from both B and C A will import ?
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A. 400 units from B and 200 units from C

B. 400 units from B

C. 200 units from each

D. 200 units from C
7. As of 2002, the ________ became the official currency union of the European Monetary System ?
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A. euro

B. mark

C. franc

D. dollar

8. Under the EUs Common Agricultural Policy, a variable import levy equals the ?
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A. support price of the EU

B. amount by which the world price exceeds the EUs support price

C. amount the which the EUs support price exceeds the world price

D. world price

9. The Common Agricultural Policy of the European Union has ?
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A. decrease American farm exports to the EU

B. lowered the price of American farm exports to the EU

C. increase American farm exports to the EU

D. not affected the price of American farm exports to the EU

10. If A forms a customs union with C, the value of trade diversion will be ?
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A. $10,000

B. $20,000

C. $0

D. $40,000

11. Which country is not a member of the European Union ?
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A. Iceland

B. Germany

C. Spain

D. France

12. Trade creation will more likely outweigh trade diversion for Country X that forms a customs union if the level of tariffs in Country X prior to the customs union is ________ and the total number of countries forming the customs union is _________?
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A. relatively high; relatively large

B. relatively high; relatively small

C. relatively low ; relatively small

D. relatively low ; relatively large

13. Criticisms against the North American Free Trade Agreement include all of the following except ?
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A. None of the above

B. American jobs will be lost to workers in Mexico

C. wages in the United States will rise relative to Mexican wages

D. The environment is not adequately protected by NAFTA

14. ________ is said to exist when the formation of a regional trading group leads to the reduction of trade with nonmember countries in favor of member countries ?
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A. trade creation

B. trade exclusion

C. trade diversion

D. trade distortion

15. The NAFTA is a ?
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A. monetary union

B. free trade area

C. customs union

D. common market

16. The implementation of a common market involves all of the following except ?
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A. a common tariff levied in imports from nonmembers

B. elimination of trade restrictions among member countries

C. prohibition to restriction on factor movements

D. a common tax system and monetary union
17. Trade diversion takes place when ?
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A. economic integration results in a movement in product origin to a lower cost member country

B. a country moves from autarky to free trade

C. economic integration results in a shift in product origin from a lower-cost, nonmember country to a member country having higher costs

D. a movement to a customs union reduces the costs of trade through standardization economic integration results in a

18. In free trade A will import ?
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A. 600 units from country C and 400 units from country B

B. 600 units from country C

C. 700 units from country C

D. 700 units from country C and 600 units from country B

19. A positive, dynamic effect of economic integration is illustrated by ?
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A. decrease customs costs

B. economy-of-scale effect

C. trade diversion effect

D. increased monopoly power of firms

20. If A forms a customs union with B, A will import ?
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A. 400 units from B

B. 200 units from each

C. 400 units from B and 200 units from C

D. 200 units from C

21. Under the Common Agricultural Policy exports of any surplus quantities EU produce are encouraged through the usage of ?
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A. export subsidies

B. variable levies

C. countertrade

D. trigger prices

22. _________ is said to exist when the formation of a regional trading group leads to an expansion of trade above pregroup levels ?
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A. trade creation

B. trade exclusion

C. trade diversion

D. trade distortion

23. Suppose that tomatoes from Mexico face a 20 percent tariff in the United States and a 25 percent tariff in Canada. If the United States and Canada maintain free trade between each other, the these two countries belong to a ?
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A. customs union

B. free-trade area

C. monetary union

D. common market

24. A ____ is a regional trading bloc in Which member countries eliminate internal trade barriers but maintain existing barriers against countries that are not member ?
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A. free trade area

B. monetary union

C. customs union

D. common market

25. Members of the EU find that trade creation|| is fostered when their economies are ?
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A. highly noncompetitive

B. geographically distant

C. small in economic importance

D. highly competitive
26. Which level of economic integration best applies to the U.S economy ?
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A. free trade area

B. customs union

C. common market

D. monetary union
27. Trade creation takes place when ?
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A. economic integration results in a movement in product origin to a lower-cost member country

B. a movement to a customs union reduces the cost of trade through standardization

C. a country moves from autarky to free trade

D. economic integration results in a shift in product origin from a lower cost nonmember country to a member country having higher costs

28. The implementation of the European Union has ?
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A. made it easier for Americans to compete against the Germans in the British market

B. made it harder for Americans of compete against the Germans in the British market

C. made it easier for Americans to compete against the Japanese in the British

D. made it harder for Americans to compete against the Japanese in the British market

29. When imports from a higher-cost supplier within a customs union replace imports from a lower-cost supplier outside the custom union, there exists ?
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A. trade diversion

B. dynamic welfare effects

C. comprehensive welfare effects

D. trade creation