Deck 8: Regional Economic Integration

Question 1

Linking neighboring countries economically and making them interdependent creates incentives to increase political cooperation as well.

Answer 1

True

Question 2

In a customs union,trade barriers are eliminated among member countries,and each country maintains its own external trade polices with nonmember countries.

Answer 2

False

Question 3

The move toward regional economic integration has been most successful in Europe.

Answer 3

True

Question 4

The Treaty of Rome,signed in 1957,established the European Free Trade Association.

Question 5

A regional free trade agreement will benefit the world only when the amount of trade it diverts exceeds the amount of trade it creates.

Question 6

The ultimate controlling unit within the EU is the European Council.

Question 7

In theory,WTO rules should ensure that a free trade agreement results in trade diversion.

Question 8

Because of the fact that everyone benefits from economic integration,it is easy to achieve and sustain.

Question 9

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.

Question 10

A major impediment to economic integration is the loss of sovereignty it entails.

Question 11

The Council of the European Union is responsible for proposing EU legislation,implementing it,and monitoring compliance with EU laws by member states.

Question 12

When lower cost external suppliers are replaced by higher cost suppliers within a free trade area,there is trade creation.

Question 13

There are two main trading blocs in Europe,the European Union and the European Free Trade Association.

Question 14

The European Union is an example of a perfect economic union.

Question 15

A common market entails even closer economic integration and cooperation than an economic union.

Question 16

A central reason for the establishment of the EU was a strong desire on the part of member countries to hold their own on the world's political and economic stage.

Question 17

It is easier to establish free trade among a limited number of adjacent countries than it is among the world community.

Question 18

Countries can reduce trade barriers more rapidly by entering into regional agreements than they could by going through the WTO.

Question 19

Agreements among countries in a geographic region to reduce,and ultimately remove,tariff and nontariff barriers to the free flow of goods,services,and factors of production between each other is known as regional economic integration.

Question 20

Regional economic integration can be seen as an attempt to achieve additional gains from the free flow of trade and investment between countries.

Question 21

The Asia-Pacific Economic Cooperation was established to increase multinational cooperation in view of the economic rise of the Pacific nations and the growing interdependence within the region.

Question 22

To exploit the opportunities presented by the EU,non-EU firms must establish EU subsidiaries.

Question 23

Proponents of NAFTA have argued that the free trade area should be viewed as an opportunity to create an enlarged and more efficient productive base for the entire region.

Question 24

The European Parliament is an elected body that debates legislation proposed by the European Commission.

Question 25

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.

Question 26

A benefit to companies of economic integration is the opportunity to centralize their production and reduce costs.

Question 27

The judges of the Court of Justice are required to act as representatives of national interests,rather than as independent officials.

Question 28

Establishment of the euro created the largest currency zone in the world,replacing the position the U.S.dollar had held for decades.

Question 29

The Single European Act committed EU countries to adopting a common currency by January 1,1999.

Question 30

In the EU,many firms have historically been limited by a low cost structure in their ability to compete globally with North American and Asian firms.

Question 31

Once barriers to trade and investment are removed,companies can treat a group of integrated countries as a single market and produce standardized products for it.

Question 32

The establishment of the euro required participating countries to give up their monetary policy.

Question 33

Until recently,only 5 percent of intra-ASEAN trade consisted of goods whose tariffs had been reduced through an ASEAN preferential trade arrangement.

Question 34

The Andean Pact is a highly successful common market modeled after the EU.

Question 35

A key benefit resulting from the adoption of the euro is the ability to compare prices across member markets.

Question 36

Great Britain,Germany,and France have led the push toward a euro zone in the EU.

Question 37

Since its establishment,the euro has had a stable trading history.

Question 38

The Maastricht Treaty entails that the ECB take orders from politicians.

Question 39

The governments of the Argentina and Brazil in 1988 agreed to enter into a free trade agreement,the goal of which was to eliminate all tariffs on bilateral trade between these countries by 1998.

Question 40

The Free Trade Area of the Americas that was established in 2005 has thus far proven to be a success.

Question 41

Which of the following is true of a common market?

A)All barriers to the trade of goods and services among member countries are removed and each country maintains its own policy toward nonmember countries.
B)It involves the free flow of products and factors of production between member countries and adoption of individual external trade policies.
C)It has no barriers to trade between member countries,includes a common external trade policy,and allows factors of production to move freely between members.
D)It eliminates trade barriers between member countries and adopts a common external trade policy and a common currency.

Question 42

In a free trade area:

A)barriers to the trade of goods and services among member nations are removed.
B)a common currency is adopted.
C)a single parliament determines political and foreign policy.
D)a common external trade policy is adopted.

Question 43

The most enduring free trade area in the world is the:

A)Asia Pacific Economic Cooperation.
B)MERCOSUR.
C)European Free Trade Association.
D)North American Free Trade Association.

Question 44

The Andean Pact is an example of a(n):

A)economic union.
B)customs union.
C)common market.
D)political union.

Question 45

A(n)_____ involves the free flow of products and factors of production between member countries and the adoption of a common external trade policy,along with a common currency,harmonization of members' tax rates,and a common monetary and fiscal policy.

A)free trade area
B)economic union
C)common market
D)customs union

Question 46

All of the following are reasons why economic integration has never been easy to achieve or sustain except:

A)even though it aids the majority,it has its costs.
B)a nation as a whole may benefit significantly,but certain groups may lose.
C)there are concerns over loss of national sovereignty.
D)linking neighboring economies makes them increasingly dependent on each other.

Question 47

On January 1,1993,_____ moved toward a single market with 340 million consumers.

A)the European Union
B)MERCOSUR
C)the Andean community
D)NAFTA

Question 48

_____ occurs when high-cost domestic producers are replaced by low-cost producers within the free trade area.

A)A free trade zone
B)Trade diversion
C)Trade creation
D)Trade interpretation

Question 49

These are the most popular form of regional economic integration,accounting for almost 90 percent of regional agreements.

A)Free trade areas
B)Customs unions
C)Common markets
D)Economic unions

Question 50

Trade diversion occurs when:

A)low-cost producers within the free trade area replace high-cost domestic producers.
B)lower-cost suppliers replace higher-cost external suppliers within the free trade area.
C)higher-cost external suppliers replace lower-cost domestic producers within the free trade area.
D)higher-cost suppliers replace lower-cost external suppliers within the free trade area.

Question 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)linking neighboring economies creates incentives for cooperation between the neighboring states and reduces the potential for violent conflict.

Question 52

Which of the following selections accurately depicts the levels of economic integration from least integrated to most integrated?

A)Economic union,common market,customs union,free trade area,and full political union.
B)Common market,economic union,full political union,free trade area,and customs union.
C)Free trade area,customs union,common market,economic union,and full political union.
D)Full political union,free trade area,common market,customs union,and economic union.

Question 53

Which of the following statements best defines a customs union?

A)All barriers to the trade of goods and services among member countries are removed and each country maintains its own policy towards nonmember countries.
B)It eliminates trade barriers between member countries and adopts a common external trade policy and a common currency.
C)It has no barriers to trade between member countries,includes a common external trade policy,and allows factors of production to move freely between members.
D)It eliminates trade barriers between member countries and adopts a common external trade policy.

Question 54

An agreement between countries in a geographic region to reduce tariff and nontariff barriers to the free flow of goods,services,and factors of production between each other is referred to as:

A)regional economic integration.
B)socioeconomic integration.
C)political integration.
D)economic-political integration.

Question 55

Identify the incorrect statement about a common market.

A)It has no barriers to trade between member countries
B)It includes a common external trade policy
C)It establishes a central political apparatus coordinating the economic,social,and foreign policy of the member states
D)It allows factors of production to move freely between members

Question 56

In a(n)_____,no discriminatory tariffs,quotas,subsidies,or administrative impediments are allowed to distort trade between member nations; however,each country is allowed to determine its own trade policies with regard to nonmembers.

A)common market
B)economic union
C)political union
D)free trade area

Question 57

In 1991,Argentina,Brazil,Paraguay,and Uruguay implemented an agreement known as:

A)NAFTA.
B)MERCOSUR.
C)APEC.
D)FTAA.

Question 58

Identify the incorrect statement pertaining to the European Union.

A)In 1993,it formally removed many barriers to doing business across borders within the EU.
B)Its member states have launched a single currency,the euro.
C)It was joined by two countries Switzerland and Norway,in 2007.
D)It has expanded to 27 countries in 2007.

Question 59

The movement toward regional economic integration has been most successful in:

A)Latin America.
B)North America.
C)Europe.
D)Asia.

Question 60

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.

Question 61

The _____ represents the interests of member states and is clearly the ultimate controlling authority within the EU.

A)European Parliament
B)European Commission
C)European Council
D)Court of Justice

Question 62

Which of the following is not a threat that emerges for international businesses as a result of regional economic integration?

A)The business environment within each grouping becomes more competitive.
B)There is a risk of being shut out of the single market by the creation of a "trade fortress."
C)It limits the ability of firms to pursue the corporate strategy of their choice.
D)The costs of doing business in a single market may fall.

Question 63

According to Alexander Yeats:

A)the trade diversion effects of MERCOSUR outweigh its trade creation effects.
B)the fastest growing items in intra-MERCOSUR trade were capital-intensive goods produced efficiently in the member countries.
C)MERCOSUR countries will be able to compete globally once the group's external trade barriers come down.
D)countries with more efficient manufacturing enterprises are getting a level playing field because of MERCOSUR's reduction in trade barriers.

Question 64

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

Question 65

Which of the following is not a main institution in the political structure of the EU?

A)The European Parliament
B)The European Central Bank
C)The European Commission
D)The Council of the European Union

Question 66

Identify the incorrect statement pertaining to the EU's Court of Justice.

A)It is comprised of one judge from each country.
B)It is the supreme appeals court for EU law.
C)Its judges are required to act as representatives of national interests.
D)A member country can bring other members to the court for failing to meet EU treaty obligations.

Question 67

For international businesses,regional economic integration such as the EU:

A)raises the costs of doing business in the region.
B)eliminates differences in culture,allowing companies to standardize marketing activities.
C)opens markets that had formerly been protected.
D)standardizes competitive practices,enabling companies to realize substantial cost economies.

Question 68

Collectively,the _____ member states account for about 55 percent of the world's GNP and 49 percent of world trade.

A)APEC
B)EU
C)NAFTA
D)MERCOSU

Question 69

In December 1991,EC members signed this treaty that committed them to adopting a common currency by January 1,1999.

A)The Treaty of Rome
B)The Delores Commission
C)The Maastricht Treaty
D)The Single European Act

Question 70

The _____,adopted by the member nations of the European Community in 1987,committed member countries to work toward the establishment of a single market by December 31,1992.

A)Maastricht Treaty
B)Treaty of Rome
C)Single European Act
D)Delores Commission

Question 71

Which of the following is not true of ASEAN?

A)Cambodia,Laos,Myanmar,and Singapore are among its members.
B)Its basic objective is to foster freer trade between member countries and to achieve cooperation in their industrial polices.
C)It has been highly successful in achieving cooperation in its industrial policies.
D)It is pushing for free trade agreements with China,Japan,and South Korea.

Question 72

Which of the following is true of the Asia-Pacific Economic Cooperation (APEC)?

A)It was founded in 2001
B)It currently has 57 member states
C)United States and Japan are not members of this body
D)Collectively,the member states account for much of the growth in the world economy

Question 73

MERCOSUR originated as a(n)_____ between Brazil and Argentina in 1988.

A)open market
B)free trade pact
C)customs union
D)free trade zone

Question 74

Bolivia,Peru,Ecuador,Columbia,and Venezuela are all members of:

A)the EU.
B)NAFTA.
C)APEC.
D)the Andean Pact.

Question 75

In early 2006,six CARICOM members and the United States established the _____,which was modeled on the EU's single market.

A)Central American Common Market
B)Central America Free Trade Agreement
C)Caribbean Single Market and Economy
D)North American Free Trade Area

Question 76

Which of the following is seen as a disadvantage of the euro?

A)Higher foreign exchange and hedging costs.
B)National authorities losing control over monetary policy.
C)It becomes difficult to compare prices across Europe.
D)Undermines the development of a pan-European capital market.

Question 77

All of the following are seen as stumbling blocks toward the establishment of the Free Trade Area of the Americas except:

A)Brazil and Argentina want the United States to reduce its subsidies to U.S.agricultural producers.
B)The United States wants its southern neighbors to agree to tougher enforcement of intellectual property rights.
C)Brazil and Argentina want the United States to scrap tariffs on agricultural imports.
D)The United States wants its southern neighbors to increase manufacturing tariffs.

Question 78

All of the following are true of the euro except:

A)its notes and coins were first issued on January 1,1999.
B)it required participating countries to give up their own currencies.
C)countries lost control of monetary policy when it was established.
D)it created the second largest currency zone in the world.

Question 79

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

Question 80

The European Coal and Steel Community,formed in 1951,was a forerunner of:

A)EFTA.
B)EU.
C)MERCOSUR.
D)APEC.