The trade creation effect of a trade bloc

Question 1 options:

	is the redirection of a country's foreign trade as a result of a discriminatory regional trade agreement, which, all other things equal, reduces the welfare gains from trade.
	is the only welfare effect of a trade bloc and so net welfare effect of a trade block is positive.
	is the increase in trade that results from a shift in trade policy and is, all other things equal, welfare enhancing.
	is the increase in trade that results from a shift in trade policy and, all other things equal, reduces welfare gains from trade .

Question 2 (1 point)

The strategic trade argument hinges on the following assumption:

Question 2 options:

	Governments do not have accurate information with which to predict the future performance of industries.
	Other countries always retaliate by protecting the same strategic industries.
	Governments make economic decisions objectively and free from the influence of special interests.
	Production is subject to increasing returns and there are no externalities.

Question 3 (1 point)

The North American Free Trade Agreement was ratified by its members:

Question 3 options:

	in 1929.
	just after World War I, when the United States opted not to join any worldwide organization.
	in 1947.
	in 1993.

Question 4 (1 point)

The Kennedy Round was much more successful in reducing tariffs than previous rounds because

Question 4 options:

	fewer countries participated, thus reducing the potential conflicts.
	the WTO was finally ratified, thus creating a permanent organization to manage the negotiations.
	countries agreed to replace tariffs with VERs.
	the United States finally abandoned the "no injury" clause, thus freeing its negotiations to make more substantial "concession."

Question 5 (1 point)

In terms of trade policy, the nineteenth century is best described as a century:

Question 5 options:

	of free trade and rapid globalization.
	when free trade was replaced by mercantilism.
	of increasing protectionism.
	of slow trade growth but rapid economic growth.

Question 6 (1 point)

The movement in productive factors and resources from one sector to another that accompanies a shift from self-sufficiency to free trade:

Question 6 options:

	will not be difficult especially when specialized machines or specialized labor are involved.
	may imply costly moving expenses and other adjustments.
	Will have no effect on the real income of the factors used intensively in the expanding export industries.
	will have no effect on the real income of the factors used intensively in the shrinking import industries.

Question 7 (1 point)

In the case of a common market, member countries agree to

Question 7 options:

	partially eliminate trade restrictions between their economies, while each country maintains its existing restrictions on trade against all outside countries.
	completely eliminate all restrictions on the flow of goods and factors of production, including labor, between their economies.
	completely eliminate all restrictions on the flow of goods between their economies, while each country maintains its existing restrictions on trade against all outside countries.

Question 8 (1 point)

According to the introduction to chapter 7, the fundamental source of protectionism is:

Question 8 options:

	the desire to avoid the losses that a shift to free trade inevitably causes to specific people and firm.
	the government's need for tariff revenue.
	nationalism.
	the need to protect industries crucial to the long-term growth of the economy.

Question 9 (1 point)

The Most Favored Nation (MFN) principle states that:

Question 9 options:

	a country should grant its favorite trade partners easier access to its national market than it grants to less favored trade partners.
	a country should grant every country the same trade privileges that it grants its most favored trade partner.
	a country should grant another country precisely the same trade privileges that the other grants it.
	a country may not grant other countries the same privileges that it grants a country designated as its most favored trading partner.

Question 10 (1 point)

The Reciprocal Trade Agreements Act was a milestone in that

Question 10 options:

	it raised tariffs sharply.
	it prevented any move toward free trade for several decades.
	it gave all trade policy responsibility back to Congress.
	it gave the executive branch of the US government the authority to negotiate trade agreements.

Question 11 (1 point)

The fact that people own a variety of productive factors, such as human capital, physical capital, and labor, implies that:

Question 11 options:

	the Stolper-Samuelson Theorem can clearly describe trade's effect on income distribution .
	the Stolper-Samuelson Theorem's conclusions are totally invalid.
	the Stolper-Samuelson Theorem cannot clearly describe trade's effect on income distribution.
	shifts in international trade do not have any effects on income distribution.

Question 12 (1 point)

The cost of trade sanctions falls:

Question 12 options:

	almost entirely on third countries who are neither directly sanctioned nor doing the sanctioning.
	exclusively on the consumers in the sanctioned economy.
	partially on the consumers of the sanctioning country.
	exclusively on exporters of the sanctioned products.

Question 13 (1 point)

Of the various GATT rounds, the largest tariff reductions were achieved during

Question 13 options:

	Kennedy and Tokyo Rounds.
	Uruguay.
	Annecy.
	the Dillon Round.

Question 14 (1 point)

Political economy models

Question 14 options:

	completely fail to explain why trade restrictions are imposed by governments. .
	show that costs of trade restrictions remain unchanged when policy makers favor the protectionist policies preferred by voters who are noticeably affected by it.
	give us many insights on why trade restrictions are imposed by governments. .
	show that costs of trade restrictions decline when policy makers favor the protectionist policies preferred by voters who are noticeably affected by it .

Question 15 (1 point)

Free trade areas

Question 15 options:

	were first discussed during the GATT conference and permitted after 1947.
	were first discussed during the Kennedy Round.
	have been formed throughout history.
	are a very recent phenomenon, having been introduced by the US and Mexico (NAFTA) in early 1990s.

Question 16 (1 point)

An important point to remember from the theoretical analysis of economic integration is that the formation of a regional free trade area

Question 16 options:

	has a theoretically ambiguous welfare effect.
	definitely decreases the net overall welfare of the member countries.
	definitely increases the overall welfare of the member countries.

Question 17 (1 point)

The European Union is an example of

Question 17 options:

	an economic union (EU)
	a custom union (CU)
	a common market (CM)
	a free trade area (FTA)

Question 18 (1 point)

The highest level of economic integration is the

Question 18 options:

	common market (CM).
	economic union (EU).
	free trade area (FTA).
	customs union (CU).

Question 19 (1 point)

Under the GATT, dumping is defined as:

Question 19 options:

	selling a product at a price above its cost of production.
	selling a product overseas at a price lower than that product sells for in the home market.
	selling a product at a price that equals its cost of production.
	selling a product below the price of any competing products in the foreign market.

Question 20 (1 point)

One reason why some people and firms seek policies to restrict international trade is that:

Question 20 options:

	they actually gain from trade restrictions.
	they mistakenly believe that it is possible to enhance productivity and economic growth.
	there are many general cases in which protection from foreign competition provides net gains for the country.
	they mistakenly believe that it is possible for some people or firms to actually gain from trade restrictions.

Question 21 (1 point)

The World Trade organization was established at the end of the

Question 21 options:

	Uruguay Round.
	Dillon Round.
	Kennedy Round.
	Tokyo Round.

Question 22 (1 point)

The General Agreement on Trade and Tariffs (GATT) signed in:

Question 22 options:

	1918
	1993
	1947
	1776

Question 23 (1 point)

Stolper-Samuelson theorem states that when an economy shifts from self-

sufficiency to free trade

Question 23 options:

	the real income of factors used relatively intensively in the expanding export industries rises, and the real income of the factors used relatively intensively in the shrinking import-competing industries falls.
	distribution of real income of factors remain unchanged.
	the real income of factors used intensively in the expanding export industries rises but the real income of the factors used relatively intensively in the shrinking import-competing industries remain unchanged.
	the real income of factors used relatively intensively in the expanding export industries falls, and the real income of the factors used relatively intensively in the shrinking import-competing industries rises.

Question 24 (1 point)

The fundamental principles of the GATT specify that, among other things,

Question 24 options:

	signatories of the agreement agree to give all nations, whether signatories to the GATT or not, most favored nation (MFN) treatment.
	countries commit to keeping their tariffs below explicit limits.
	if trade is to be restricted, countries should use quotas rather than tariffs or other less visible trade barriers.
	countries may discriminate in favor of neighboring countries.

Question 25 (1 point)

Which of the following is not a characteristic of a Custom Union (CU)?:

Question 25 options:

	The members do not necessarily permit the free movement of labor between them.
	All members of the trade bloc apply the exact same tariff rates against outside countries.
	There are no quotas on imports from other trade bloc members.
	All trade bloc members set their own tariff rates on imports from outside the trade bloc.