AGB 302 QUIZ 5 Exam Questions with 100% Correct Answers

all barriers to the trade of goods and services among member countries are removed. In the theoretically ideal free trade area, no discriminatory tariffs, quotas, subsidies, or administrative impediments are allowed to distort trade between mem-bers. Each country, however, is allowed to determine its own trade policies with regard to nonmembers. Thus, for example, the tariffs placed on the products of nonmember coun-tries may vary from member to member. - Answer-free trade area eliminates trade barriers between member countries and adopts a common external trade policy. - Answer-customs union has no barriers to trade among member countries, includes a common external trade policy, and allows factors of production to move freely among members. Labor and capital are free to move because there are no restrictions on immigration, emigration, or cross-border flows of capital among member countries. - Answer-common market involves the free flow of products and factors of production among member countries and the adoption of a com-mon external trade policy, but it also requires a common currency, harmonization of mem-bers' tax rates, and a common monetary and fiscal policy. - Answer-economic union in which a central political apparatus coordinates the economic, social, and foreign policy of the member states. - Answer-political union occurs when high-cost domestic producers are replaced by low-cost pro-ducers within the free trade area. It may also occur when higher-cost external producers are replaced by lower-cost external producers within the free trade area. - Answer-Trade creation occurs when lower-cost external suppliers are replaced by higher-cost suppliers within the free trade area. - Answer-Trade diversion represents the interests of member states. It is clearly the ulti-mate controlling authority within the EU because draft legislation from the commission can become EU law only if the council agrees. The council is composed of one representa-tive from the government of each member state. T - Answer-European Council The parliament, which meets in Strasbourg, France, is primarily a consultative rather than legislative body. - Answer-European Parliament which is comprised of one judge from each country, is the su-preme appeals court for EU law - Answer-rt of Justice