HTM 2314 Chapter 9 Exam Questions
and Answers All Correct
The United States imports sugar from several nations. If the NAFTA agreement caused
the United States to import sugar only from Canada, even though it cost more to do so,
it would be an example of - Answer-trade diversion.
Mexico agreed to NAFTA after it was determined that the country's oil industry would be
controlled by Mexico. Why did Mexico fight for this right? - Answer-It wanted to maintain
national sovereignty.
A(n) __________ has no barriers to trade among member countries, includes a
common external trade policy, and allows factors of production to move freely among
members, but does not have a common currency - Answer-common market
Earth Drivers Inc. sells construction equipment throughout the euro zone. The company
has noticed that some customers travel to countries where equipment sells for less to
obtain a better deal. What implication of adopting the euro as a common currency does
this situation demonstrate? - Answer-It makes it easier to compare prices across
Europe.
t/f: As of 2020, all members of the European Union have adopted the euro as their
currency. - Answer-false
t/f: Members of the European Parliament are directly elected by the populations of the
member states. - Answer-true
t/f: The North American Free Trade Agreement is the most enduring free trade area in
the world. - Answer-false
t/f: Economic theories suggest that free trade and investment is a zero-sum game, in
which all participating countries stand to lose. - Answer-false
t/f: In recent decades there have been fewer trade blocs established to promote regional
economic integration. - Answer-false
t/f: One threat that firms outside of trading areas face is the creation of a "trade
fortress." - Answer-true
, Two South American countries formed a free trade agreement. As a result, one of the
countries that used to produce its own refrigeration units at a higher cost now imports
them from the other country at a lower cost. This is an example of - Answer-trade
creation.
The Treaty of Rome provided for the establishment of a(n) - Answer-common market.
t/f: In a free trade area, all barriers to the trade of goods and services among member
countries are removed and a common external trade policy is adopted. - Answer-false
t/f: The European Parliament, which meets in Strasbourg, France, is primarily a
consultative rather than legislative body. - Answer-true
Identify the correct sequence of economic integration starting from the least integrated
to the most integrated. - Answer-free trade area, customs union, common market,
economic union, and political union
t/f: The adoption of a common currency, the euro, makes it easier to compare prices
across Europe, which has resulted in increased competition. - Answer-true
After the creation of a free trade area involving five nations, higher-cost external
producers of rice were replaced by lower-cost external rice producers within the free
trade area. This is known as - Answer-trade creation.
Assume that France and Italy agree to remove all barriers to the trade of goods
between them. However, the countries agree that each would be allowed to determine
its own trade policies with regard to nonmembers. The economic integration between
these countries is called a(n) - Answer-free trade area.
Suppose the countries of Portugal and Belgium set up a free trade area, eliminating all
trade barriers between themselves but maintaining tariffs on imports from the rest of the
world. Now, Portugal begins to import metal from Belgium. However, Portugal had
previously been importing metal from England, which produced metal more cheaply
than both Portugal and Belgium. What is this an example of? - Answer-trade diversion
As a result of the formation of a free trade area between six member countries in the
Pacific Rim, one member country found that its lower-cost external suppliers were
replaced by higher-cost suppliers within the free trade area. This is an example of -
Answer-trade diversion.
The creation of a single market increases price competition for business. In other words,
it creates a(n) - Answer-threat.
When Norway, Iceland, Liechtenstein, and Switzerland established the EFTA, all
barriers to the free flow of goods and services between the countries were removed.
Member nations were allowed to determine the level of trade protection for goods
and Answers All Correct
The United States imports sugar from several nations. If the NAFTA agreement caused
the United States to import sugar only from Canada, even though it cost more to do so,
it would be an example of - Answer-trade diversion.
Mexico agreed to NAFTA after it was determined that the country's oil industry would be
controlled by Mexico. Why did Mexico fight for this right? - Answer-It wanted to maintain
national sovereignty.
A(n) __________ has no barriers to trade among member countries, includes a
common external trade policy, and allows factors of production to move freely among
members, but does not have a common currency - Answer-common market
Earth Drivers Inc. sells construction equipment throughout the euro zone. The company
has noticed that some customers travel to countries where equipment sells for less to
obtain a better deal. What implication of adopting the euro as a common currency does
this situation demonstrate? - Answer-It makes it easier to compare prices across
Europe.
t/f: As of 2020, all members of the European Union have adopted the euro as their
currency. - Answer-false
t/f: Members of the European Parliament are directly elected by the populations of the
member states. - Answer-true
t/f: The North American Free Trade Agreement is the most enduring free trade area in
the world. - Answer-false
t/f: Economic theories suggest that free trade and investment is a zero-sum game, in
which all participating countries stand to lose. - Answer-false
t/f: In recent decades there have been fewer trade blocs established to promote regional
economic integration. - Answer-false
t/f: One threat that firms outside of trading areas face is the creation of a "trade
fortress." - Answer-true
, Two South American countries formed a free trade agreement. As a result, one of the
countries that used to produce its own refrigeration units at a higher cost now imports
them from the other country at a lower cost. This is an example of - Answer-trade
creation.
The Treaty of Rome provided for the establishment of a(n) - Answer-common market.
t/f: In a free trade area, all barriers to the trade of goods and services among member
countries are removed and a common external trade policy is adopted. - Answer-false
t/f: The European Parliament, which meets in Strasbourg, France, is primarily a
consultative rather than legislative body. - Answer-true
Identify the correct sequence of economic integration starting from the least integrated
to the most integrated. - Answer-free trade area, customs union, common market,
economic union, and political union
t/f: The adoption of a common currency, the euro, makes it easier to compare prices
across Europe, which has resulted in increased competition. - Answer-true
After the creation of a free trade area involving five nations, higher-cost external
producers of rice were replaced by lower-cost external rice producers within the free
trade area. This is known as - Answer-trade creation.
Assume that France and Italy agree to remove all barriers to the trade of goods
between them. However, the countries agree that each would be allowed to determine
its own trade policies with regard to nonmembers. The economic integration between
these countries is called a(n) - Answer-free trade area.
Suppose the countries of Portugal and Belgium set up a free trade area, eliminating all
trade barriers between themselves but maintaining tariffs on imports from the rest of the
world. Now, Portugal begins to import metal from Belgium. However, Portugal had
previously been importing metal from England, which produced metal more cheaply
than both Portugal and Belgium. What is this an example of? - Answer-trade diversion
As a result of the formation of a free trade area between six member countries in the
Pacific Rim, one member country found that its lower-cost external suppliers were
replaced by higher-cost suppliers within the free trade area. This is an example of -
Answer-trade diversion.
The creation of a single market increases price competition for business. In other words,
it creates a(n) - Answer-threat.
When Norway, Iceland, Liechtenstein, and Switzerland established the EFTA, all
barriers to the free flow of goods and services between the countries were removed.
Member nations were allowed to determine the level of trade protection for goods
