16. The currency of the country of Avania falls sharply in value against the currency of Bukovia, a neighboring country. Which of these consequences is likely to follow?

1. Bukovias products will become more price competitive in Avania
2. Avanian products will become more price competitive in Bukovia
3. Avanias products will cost more in Bukovia
4. There will be no difference in the volume or direction of trade
5. Bukovias exports to Avania will increase, because Bukovias goods will become cheaper in Avenia

17. Which of the following is seen as a disadvantage of regional trade areas in which the member countries agree to a common set of external tariffs?

1. Trade creation: the reduction in trade barriers among members allows demand to be directed toward efficient firms inside the area
2. Strategic pricing: Firms outside the area lower prices to remain competitive in spite to the common tariffs
3. Trade diversion: Trade is diverted from more efficient firms outsides the area to less firms inside it that are now protected by the common tariffs
4. Tariff reduction: countries outside the area abolish barriers to imports to benefit their consumers