POS 486 EXAM (ARIZONA STATE UNIVERSITY) 40 QUESTIONS AND ANSWERS| VERIFIED| 100% CORRECT WITH EXPLANATIONS

Question 1 0 out of 2.5 points Which of the following is NOT a policy that trade liberalization would seek to eliminate? Selected Answer: Correct Answer: Response Feedback: 4. domestic content requirements 2. trade agreements Refer to Chapter 1, pp. 22-24, and Assignment 1 • Question 2 Which of the following does NOT describe the WTO? 2.5 out of 2.5 points Selected Answer: Correct Answer: Response Feedback: 2. was drafted in Havana, Cuba in 1948 2. was drafted in Havana, Cuba in 1948 The questions asks which is NOT correct. We know that a trade institution was discussed at Bretton Woods but not created. We also know that the WTO didn't come into creation until 1995, with the GATT guiding international trade from . We have also learned that it covers international trade for most countries globally, that it has a broad mandate, and that it expanded GATT. Therefore, the correct answer is 2. See Chapter 2/Lecture 2. • Question 3 The WTO relies on 2.5 out of 2.5 points Selected Answer: Correct Answer: Response Feedback: 1. agreement by consensus 1. agreement by consensus See Chapter 2/Lecture 2 on decision-making in WTO, intergovernmental bargaining, multiyear rounds and difficulty getting consensus. • Question 4 The majority of regional trade agreements 2.5 out of 2.5 points Selected Answer: Correct Answer: Response Feedback: 4. are Free Trade Areas 4. are Free Trade Areas See Chapter 2. For those of us who are visual learners, Oatley has provided quite a graphic representation on p. 37. • Question 5 The enforcement problem of trade agreements refers to the fact that 2.5 out of 2.5 points Selected Answer: Correct Answer: Response Feedback: 2. governments cannot be certain that other governments will comply with the trade agreements they conclude 2. governments cannot be certain that other governments will comply with the trade agreements they conclude Refer to pp. 58-59 • Question 6 2.5 out of 2.5 points If more trade is created than diverted, a regional trade agreement (RTA) Selected Answer: Correct Answer: Response Feedback: 2. has liberalized trade 2. has liberalized trade Refer to p. 40 • Question 7 The difference between a FTA and a Customs Union 2.5 out of 2.5 points Selected Answer: Correct Answer: 2. lies in the use of a common tariff policy 2. lies in the use of a common tariff policy Response Feedback: See Chapter 3, p. 37 and Lecture 3. While in an FTA members retain power to det tariffs on non-members, in a Customs Union members impose a common tariff on all goods entering from non-members. • Question 8 Consumption Indifference Curves 2.5 out of 2.5 points Selected Answer: Correct Answer: Response Feedback: 2. capture the combination of goods consumers will want based on their utility 2. capture the combination of goods consumers will want based on their utility See "The Economic Case for Trade" in Chapter 3, pp. 46-50, specifically the bottom of p. 47. • Question 9 In an autarkic country, the `production possibility frontier' 0 out of 2.5 points Selected Answer: Correct Answer: Response Feedback: 3. can be shifted to expand production and consumption through trade 1. defines the limits of consumption as there is no trade See "The Economic Case for Trade" in Chapter 3, p. 47. An autarkic country cannot consume more than it produces since it does not trade. • Question 10 2.5 out of 2.5 points Which of the following explains why coutnries that trade choose to produce goods that use a lot of their abundant factor? Selected Answer: Correct Answer: Response Feedback: 1. comparative advantage 1. comparative advantage Refer to Chapter and Lecture 3 on comparative advantage and trade, specifically p 52, Quiz 1 and Assignment 1