(Legacy) - Economic Integration
15 questions· page 1 of 2
Country X joins a customs union with country Y and will remove the tariff on its imports of good M from country Y.
Under which conditions will trade creation in country X be the largest?
Options
| existing size of country X’s tariff on imports of good M | price elasticity of demand for good M in country X | |
|---|---|---|
| A | large | -0.8 |
| B | large | -1.4 |
| C | small | -0.8 |
| D | small | -1.4 |
Two countries trade with one another without any forms of protection. They also impose a common external tariff on the imports from all other countries.
What have these two countries formed?
Options
A a customs union
B a free trade area
C a monetary union
D an economic union
Country X joins a customs union with country Y and will remove the tariff on its imports of good M from country Y.
Under which conditions will trade creation in country X be the smallest?
Options
| existing size of country X's tariff on imports of good M | price elasticity of demand for good M in country X | |
|---|---|---|
| A | large | -0.8 |
| B | large | -1.4 |
| C | small | -0.8 |
| D | small | -1.4 |
The European Union consists of a group of countries with free trade between its members and a common external tariff on trade with non-members.
What would weaken the operation of this customs union?
Options
A devaluation of any member’s currency
B differences in wage costs between members
C entry tests for seasonal migrant workers
D one member country agreeing a trade deal with a non-member country
What is present in a customs union but not in a free trade area?
Options
A a common external tariff with the rest of the world
B a common monetary system
C a common system of taxation
D the free movement of all goods, services and factors of production
What is the difference between a customs union and a free trade area?
Options
A Only the customs union has a common external tariff with the rest of the world.
B Only the customs union requires fixed exchange rates between member countries.
C Only the free trade area needs to eliminate tariffs between member countries.
D Only the free trade area requires freedom of movement for labour and capital between member countries.
A particular good in the Barbados market could be supplied by domestic producers, or producers in Trinidad and Tobago, or producers in the United States (US), at the prices shown in US dollars.
| origin of production | price |
|---|---|
| Barbados | $1.00 |
| Trinidad and Tobago | $0.85 |
| US | $0.75 |
Originally, Barbados had a 20% ad valorem duty on imports from Trinidad and Tobago and the US.
Barbados then formed a customs union with Trinidad and Tobago, with a common external tariff, also of 20%.
From which countries would Barbados import the good, before the formation of the customs union and after the formation of the customs union?
Options
| before | after | |
|---|---|---|
| A | neither | Trinidad and Tobago |
| B | neither | US |
| C | US | Trinidad and Tobago |
| D | US | US |
What is a characteristic of a customs union but not of a free trade area?
Options
A a common external tariff
B a common tariff between member countries
C fixed exchange rates between member countries
D the abolition of all tariffs between member countries
Four countries, A, B, C and D, trade internationally.
Each circle in the diagram represents a free trade area between the countries within the circle. A country can belong to more than one free trade area. Countries outside of a circle face trade barriers.
Which country has the greatest opportunity to benefit from free international trade?
Options
A country A on Fig. 26.1
B country B on Fig. 26.1
C country C on Fig. 26.1
D country D on Fig. 26.1
The introduction of the euro as the common currency of much of Western Europe created a powerful economic group.
What is least likely to have been the intention?
Options
A faster economic growth in the region
B greater labour mobility and employment in the region
C more international trade within the region
D more international trade with non-members