International Business Chapter 9

A (makes it easier to compare prices across Europe)

A benefit of adopting the euro as a common currency is that it: A) makes it easier to compare prices across Europe B) makes Europe an optimal currency area C) increases the range of investment options open only to institutions D) leads to higher prices, which translate into substantial gains for European producers E) decreases competition because it has become harder for consumers to shop around

C (lowers foreign exchange and hedging costs in Europe)

A key advantage of adopting the euro is that it: A) helps in reduction of competition in Europe B) has prevented the development of a highly liquid pan-European capital market C) lowers foreign exchange and hedging costs in Europe D) insulates Europe from international competition E) increases the range of investment options open to institutions only.

D (give up control over monetary policy)

Establishment of the euro required participating national governments to: A) have a sound fiscal situation B) have stable exchange rates C) be democratic in nature D) give up control over monetary policy E) have a high degree of price stability

A (Maastricht Treaty)

The European Community became the European Union in 1993 following the ratification of the: A) Maastricht Treaty B) Warsaw Pact C) Treaty of Rome D) Single European Act E) Lisbon Treaty

D (draft legislation from the European Commission can become EU law only if the council agrees)

The European Council is considered to be the ultimate controlling authority within the European Union (EU) because: A) it monitors member-states to make sure they are complying with EU laws. B) it has a monopoly in proposing EU legislation C) it has 754 members that are directly elected by the populations of the member-states D) draft legislation from the European Commission can become EU law only if the council agrees E) it is the supreme appeals court for EU law

B (Customs union)

Three countries enter into an agreement to remove all tariffs and trade barriers between them. They decide on a common trade policy with regard to nonmembers. Faced with political backlash, the countries stop short of allowing mobility of factors of production such as labor and capital. Which of the following levels of economic integration best describes this arrangement? A) Political union B) Customs union C) Common market D) Economic union E) Monetary union

D (Europe)

Where has the movement toward regional economic integration been most successful? A) Africa B) South America C) North America D) Europe E) Asia

A (The European Union and the European Free Trade Association)

Which of the following are significant trade blocks in Europe? A) The European Union and the European Free Trade Association B) The European Federation and the European Trade Block C) The European Commission and the COMINTERN D) The European Federation and the European Trade Association E) The European Economic Community and the European Federation

D (Free trade agreements)

Which of the following are the most popular form of regional economic integration, accounting for almost 90% of regional agreements? A) Licensing agreements B) Economic unions C) Common markets D) Free trade agreements E) Political unions

C (Costs and national sovereignty)

Which of the following are the two impediments to regional economic integration? A) Labor activism and political ideologies B) Immigration and political ideologies C) Costs and national sovereignty D) Political will and popular support E) Political ideologies and international policies

C (The 18 member nations who use the euro as their currency)

Which of the following comprises the euro zone? A) The 27 member nations of the European Union B) The member nations of the European Union and the applicants to the union C) The 18 member nations who use the euro as their currency D) The member nations of the European Union and countries who have pegged their currencies to the euro E) The 21 member nations that have their members in the European Parliament

B (France)

Which of the following countries has adopted the euro as its currency? A) Great Britain B) France C) Denmark D) Sweden E) Switzerland

E (Economic union)

Which of the following entails a closer economic integration and cooperation than a common market? A) Command economy B) Customs union C) Efficient market D) Free trade area E) Economic union

D (European Parliament)

Which of the following has 754 members as of 2014, and is directly elected by the populations of the member-states? A) Court of Justice B) European Council C) European Commission D) European Parliament E) European Community

C (Common market)

Which of the following has no barriers to trade between member countries, includes a common external trade policy, and allows factors of production to move freely between members? A) Command economy B) Customs union C) Common market D) Efficient market E) Free trade area

A (European Parliament)

Which of the following meets in Strasbourg, France, is primarily a consultative rather than a legislative body, and debates legislation proposed by the commission and forwarded to it by the council? A) European Parliament B) European Central Bank C) Court of Justice D) European Free Trade Association E) European Community

C (Trade creation)

Which of the following occurs when high-cost domestic producers are replaced by low-cost producers within a free trade area? A) Value creation B) Strategic pricing C) Trade creation D) Trade diversion E) Economic exposure

D (Trade diversion)

Which of the following occurs when lower-cost external suppliers are replaces by higher-cost suppliers within a free trade area? A) Trade creation B) Strategic pricing C) Synergy D) Trade diversion E) Protectionism

A (Regional economic integration)

Which of the following refers to agreements among countries in a geographic region to reduce and ultimately remove tariff and nontariff barriers to the free flow of goods, services, and factors of production between each other. A) Regional economic integration B) Cross-cultural integration C) Zoning agreement D) Administrative trade policies E) Balance-of-trade equilibrium

C (Coordination and policy harmonization problems are largely a function of the number of countries that seek agreement)

Which of the following supports the economic case for regional economic integration? A) International institutions such as the WTO have been moving the world away from a free trade regime B) The greater the number of countries involved in a free trade agreement, the fewer the perspectives that must be reconciled C) Coordination and policy harmonization problems are largely a function of the number of countries that seek agreement D) It is difficult to establish a free trade and investment regime among a limited number of adjacent countries as compared to the world community E) Since most governments do not intervene, unrestricted free trade and FDI have become a reality

A (The Maastricht Treaty)

Which of the following treaties committed European Community members to adopt a common currency by January 1, 1999? A) The Maastricht Treaty B) The Treaty of Rome C) The Treaty of Lisbon D) The Montreal Treaty E) The Treaty of Paris

C (The devastation of Western Europe during two world wars and the desire for a lasting peace)

Which of the following is a factor that resulted in the establishment of the European Union? A) The spectacular success of the North American Free Trade Agreement (NAFTA) B) The trade impasse following the oil crisis in the 1970s that occurred due to collusion among oil producing nations C) The devastation of Western Europe during two world wars and the desire for a lasting peace D) The emergence of Japan as an economic and industrial superpower despite the nuclear holocaust E) The rise of communism in Europe

B (Free movement of factors of production between member nations)

Which of the following is a feature of a common market? A) Absence of a common external trade policy with regard to nonmembers B) Free movement of factors of production between member nations C) Establishment of barriers to the free flow of goods between member nations D) Lack of administrative machinery to oversee trade relations with nonmembers E) Mandatory use of a common currency among member nations

D (Great Britain refusing to adopt the common currency of the European Union, the euro)

Which of the following is an example of concerns over national sovereignty acting as an impediment to regional economic integration? A) The Organization of the Petroleum Exporting Countries regulating the supply of petroleum as a cartel B) The Asia-Pacific Economic Cooperation failing to establish itself as a regional arrangement C) Admission of Eastern European nations into the European Union D) Great Britain refusing to adopt the common currency of the European Union, the euro E) The rise of the WTO

C (European Council)

Which of the following is considered to be the ultimate controlling authority within the European Union? A) Court of Justice B) European Commission C) European Council D) European Parliament E) European Community

B (Political union)

Which of the following is defined as a central political apparatus that coordinates the economic, social, and foreign policy of the member-states? A) Free trade area B) Political union C) Economic union D) Common market E) Command economy

A (A free trade area)

Which of the following is defined as a group of countries committed to removing all barriers to the free flow of goods and services between each other, but pursuing independent external trade policies? A) A free trade area B) Command economy C) Efficient market D) Foreign exchange market E) Location economy

A (A free trade area)

Which of the following is the economic level corresponding to the least integration? A) A free trade area B) A customs union C) A common market D) An economic union E) A political union

A (The European Union's competition commissioner has been gaining influence as the chief regulator of competition policy in the member nations of the European Union)

Which of the following is true about the European Commission? A) The European Union's competition commissioner has been gaining influence as the chief regulator of competition policy in the member nations of the European Union B) The European Commission has to be approved by the Council of the European Union before it can begin work C) The European Commission does not have a policing role with respect to European Union laws D) The legislation proposed by the European Commission goes directly to the European Parliament E) The European Commission is the ultimate controlling authority within the European Union

D (Countries can enhance their political weight in the world by grouping their economies)

Which of the following is true of te political case for regional economic integration? A) Linking neighboring economies increases the potential for violent conflict B) Free trade stimulates economic growth, which creates dynamic gains from trade C) Making neighboring economies increasingly dependent on each other fails to create incentives for political cooperation D) Countries can enhance their political weight in the world by grouping their economies E) Those who have sought a united Europe have always had a desire to make another war in Europe imminent

B (It committed the European Community to establish common policies in agriculture and transportation)

Which of the following is true of the Treaty of Rome? A) It obliged all European Union members to adopt the euro B) It committed the European Community to establish common policies in agriculture and transportation C) It called for the establishment of internal trade barriers D) It allowed members to determine the level of protection applied to goods coming from outside E) It called for abolition of a common external tariff

B (Each member country is allowed to determine its own trade policies with regard to nonmembers)

Which of the following is true with regard to a free trade area? A) Factors of production are allowed to move freely between member nations B) Each member country is allowed to determine its own trade policies with regard to nonmembers C) Member nations are required to have a common currency D) Member nations are required to have a common monetary and fiscal policy E) Member nations are required to have a central political apparatus that coordinates economic, social, and foreign policy

C (It involves the free flow of products and factors of production among member countries)

Which of the following is true with regard to an economic union? A) There are restrictions on immigration, emigration, or cross-border flow of capital among member countries B) It entails less economic integration and cooperation than a common market C) It involves the free flow of products and factors of production among member countries D) It is defined as a central political apparatus that coordinates the economic, social, and foreign policy of the member-states. E) It does not adopt a common external trade policy

C (Regional economic integration is good for consumers because it lowers prices)

Which of the following is true with regard to economic integration? A) Agreements designed to promote freer trade within regions have failed to produce gains from trade for all member countries B) WTO members are not required to notify the organization of any regional trade agreements in which they participate C) Regional economic integration is good for consumers because it lowers prices D) Regional economic integration benefits producers because they do not have to adapt to a more competitive environment E) The movement toward regional economic integration has been most successful in Asia

D (Economic union)

Which of the following levels of economic integration involves the use of a common currency, harmonization of members tax rates, and a common monetary and fiscal policy? A) Free trade area B) Customs union C) Common market D) Economic union E) Command economy