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Solution

1 Several levels of economic integration are possible in theory. From least

integration to most integrated, they are:
A a free trade area,
B a customs union,
C a common market,
D All of the above
2. In the theoretically ideal free trade area, ____________________ are allowed to
distort trade between members.
ADiscriminatory tariffs,
BQuotas, subsidies,
CAdministrative impediments
DNone of the above
3. Trade diversion occurs when higher cost suppliers within the free trade area
replace:
ALower cost external suppliers
BHigher cost external suppliers
CLower cost internal suppliers
DHigher cost internal suppliers
4. The Single European Act called for the:
ARemoval of border controls,
BMutual recognition of standards,
COpen public procurement,
DAll of the above
5. The contents of NAFTA include:
AThe violation of intellectual property rights
BThe protection of intellectual property rights
CThe intellectual property trademarks
DNone of the above
6. The Euro reduces:
AProfits and losses
BTariffs and quotas
CExchange rate costs and risks
DAll of the above
7. Trade creation occurs when:
ALow cost producers within the free trade area replace high cost domestic
producers.
BHigh cost producers within the free trade area replace high cost domestic
producers.
CLow cost producers within the free trade area replace low cost domestic
producers.
DHigh cost producers within the free trade area replace low cost domestic
producers.
8. The European Commission is responsible for:
AProposing EU legislation,
BImplementing it,
CMonitoring compliance with EU laws by member states
DAll of the above
9. A customs union eliminates:
ATrade barriers between member countries and rejects a common external trade
policy.
BTrade barriers between member countries and adopts a common external
trade policy.
CTrade barriers between nonmember countries and adopts a common external trade
policy.
DTrade barriers between nonmember countries and adopts a common internal trade
policy.
10. A regional free trade agreement will benefit the world only if the amount of
trade it creates:
AExceeds the amount it diverts
BDecreases the amount it diverts
CExceeds the amount it creates
DNone of the above

1 D
2 D
3 A
4 D
5 B
6 C
7 A
8 D
9 B
10 A