Which of the following is true of the theoretically ideal free trade area?
A) Factors of production are allowed to move freely between member nations.
B) Member countries are not allowed to determine their own trade policies with regard to nonmembers.
C) No discriminatory tariffs, quotas, subsidies, or administrative impediments are allowed to distort trade between members.
D) Member nations are required to have a common currency.
E) Member nations are required to have a common monetary and fiscal policy.

Question

Quizplus · Accepted Answer

The ideal free trade area requires that trade between member nations is not distorted by discriminatory tariffs, quotas, subsidies, or administrative impediments. The other options in the question are not necessary for the ideal free trade area. Factors of production may or may not be allowed to move freely, and member countries may or may not determine their own trade policies with non-members. A common currency or monetary and fiscal policy are not prerequisites for a free trade area.

Which of the Following Is True of the Theoretically Ideal