Regional Trading Arrangements

Show Answers

Correct options are highlighted when revealed.

1.Which of the following is NOT a common criticism of the North American Free Trade Agreement (NAFTA)?

Wages in the United States are expected to increase compared to those in MexicoEmployment opportunities in the U.S. will decline due to jobs moving to MexicoNAFTA fails to provide sufficient environmental safeguardsAll of the above are valid criticisms

2.For Country X entering a customs union, under which conditions is trade creation more likely to surpass trade diversion?

when tariffs were initially high and the customs union includes many countrieswhen tariffs were initially high and the customs union includes only a few countrieswhen tariffs were initially low and the customs union includes many countrieswhen tariffs were initially low and the customs union includes only a few countries

3.Which of the following represents a beneficial and proactive impact of economic integration?

The effect of trade diversionGrowth in firms' monopoly powerReduction in customs dutiesRealization of economies of scale

4.What term describes the increase in trade resulting from the establishment of a regional trading bloc that raises trade volumes beyond previous levels?

trade creationtrade diversiontrade exclusiontrade distortion

5.What term describes the situation when a regional trade agreement causes a decrease in trade with countries outside the group, benefiting member nations instead?

6.What is the amount of trade diversion when country A establishes a customs union with country C?

$0$10,000$20,000$40,000

7.If country A applies a $10 per unit tariff on imports from both countries B and C, how many units will A import?

8.When does trade diversion occur in the context of economic integration?

When a nation transitions from self-sufficiency to engaging in free tradeWhen forming a customs union lowers trade expenses by harmonizing regulationsWhen economic integration causes sourcing to shift towards a member country with lower production costsWhen economic integration causes sourcing to move from a more cost-efficient non-member country to a higher-cost member country

9.Which of the following is NOT a characteristic of a common market?

Removal of trade barriers between member statesEstablishment of a unified tax policy and shared currency systemFreedom of movement for production factors among membersImposition of a uniform external tariff on imports from outside countriesCoordination of economic policies among member nations