NAFTA was primarily formed because the member nations have ________.

NAFTA was primarily formed because the member nations have ________. 

A) static and dynamic liberalization policies
B) similarly sized economies and resources
C) geographic proximity to each other
D) competing interests with the EU


Answer: C) geographic proximity to each other

Which of the following are members of NAFTA?

Which of the following are members of NAFTA?

A) the United States, Canada, and Mexico
B) North America and Latin America
C) the United Kingdom, the United States, and Canada
D) the United States, Canada, and Brazil


Answer: A) the United States, Canada, and Mexico

Which of the following recently threatened the future of the EU's common currency?

Which of the following recently threatened the future of the EU's common currency?

A) refusal of the UK to use the euro
B) failed mergers and acquisitions
C) debt crisis in Greece
D) human rights issues


Answer: C) debt crisis in Greece

Korman Industries is a foreign multinational that recently established operations in the European Union. What is the most likely advantage for Korman as a result?

Korman Industries is a foreign multinational that recently established operations in the European Union. What is the most likely advantage for Korman as a result? 

A) Governance processes are streamlined because local governments have been eliminated.
B) Market size is larger because of the elimination of internal tariff barriers.
C) Differential external tariff barriers exist for product shipments.
D) The EU uses English as its official language.


Answer: B) Market size is larger because of the elimination of internal tariff barriers.

Hudson Manufacturing is an MNE based in the U.S. with operations in Asia. The firm is considering expansion into the European Union. Executives at the firm are debating whether central Europe or Eastern Europe would be best for the firm. Which of the following best supports a decision to establish operations in Eastern Europe?

Hudson Manufacturing is an MNE based in the U.S. with operations in Asia. The firm is considering expansion into the European Union. Executives at the firm are debating whether central Europe or Eastern Europe would be best for the firm. Which of the following best supports a decision to establish operations in Eastern Europe? 

A) Hudson wants to implement a high-performance work system.
B) Hudson plans to staff the foreign facility with local managers.
C) Hudson wants to minimize costs by keeping wages low.
D) Hudson recently lost money in a joint venture.


Answer: C) Hudson wants to minimize costs by keeping wages low.

Hudson Manufacturing is an MNE based in the U.S. with operations in Asia. The firm is considering expansion into the European Union. Which of the following questions is most relevant to the decision?

Hudson Manufacturing is an MNE based in the U.S. with operations in Asia. The firm is considering expansion into the European Union. Which of the following questions is most relevant to the decision?

A) What is the primary language of most workers?
B) Which country has the best production location?
C) Which currency has the most favorable value of the euro?
D) Which country has the lowest tariffs for manufactured products?


Answer: B) Which country has the best production location?

Which of the following members of the European Union has NOT adopted the euro?

Which of the following members of the European Union has NOT adopted the euro?

A) United Kingdom
B) Estonia
C) Germany
D) Greece


Answer: A) United Kingdom

Which of the following statements about the euro is true?

Which of the following statements about the euro is true?

A) It was adopted by all existing EU members when it was first initiated.
B) It must be adopted by countries as a precondition to joining the EU.
C) It cannot be used by countries that are not members of the EU.
D) It was designed to eliminate currency as a barrier to trade in the EU.


Answer: D) It was designed to eliminate currency as a barrier to trade in the EU.

The ________ is the common currency of the European Union.

The ________ is the common currency of the European Union.

A) franc
B) pound
C) euro
D) mark


Answer: C) euro

Critics of the Lisbon Treaty primarily argue that the legislation will ________.

Critics of the Lisbon Treaty primarily argue that the legislation will ________. 

A) reduce national sovereignty
B) implement trade restrictions
C) develop a monetary union
D) weaken decision making


Answer: A) reduce national sovereignty

Which of the following was primarily responsible for establishing the euro?

Which of the following was primarily responsible for establishing the euro?

A) Lisbon Treaty
B) Treaty of Maastricht
C) European Finance Act
D) Single European Act


Answer: B) Treaty of Maastricht

The EU organization that ensures consistent interpretation and application of EU treaties is the ________.

The EU organization that ensures consistent interpretation and application of EU treaties is the ________.

A) European Commission
B) Council of Ministers
C) Court of Justice
D) Council of Treaties and Laws


Answer: C) Court of Justice

The EU organization that provides political leadership, drafts laws, and runs the daily programs of the EU is the ________.

The EU organization that provides political leadership, drafts laws, and runs the daily programs of the EU is the ________.

A) European Commission
B) Council of Ministers
C) European Parliament
D) European Central Bureaucracy


Answer: A) European Commission

The three major responsibilities of the ________ are legislative power, control over the budget, and supervision of executive decisions.

The three major responsibilities of the ________ are legislative power, control over the budget, and supervision of executive decisions.

A) European Commission
B) European Council
C) European Parliament
D) European Court of Justice


Answer: C) European Parliament

The ________ is the European Union's ultimate decision-making body and is composed of the different ministers of the member countries.

The ________ is the European Union's ultimate decision-making body and is composed of the different ministers of the member countries.

A) European Commission
B) Council of the European Union
C) European Parliament
D) European Court of Justice


Answer: B) Council of the European Union

Because the size of the market increases when trade barriers fall, companies can increase their production, which will result in lower costs per unit. This phenomenon is known as ________.

Because the size of the market increases when trade barriers fall, companies can increase their production, which will result in lower costs per unit. This phenomenon is known as ________.

A) trade creation
B) economies of scale
C) diseconomies of scale
D) increased competition


Answer: B) economies of scale

Assume that U.S. companies are importing the same product from Mexico and Taiwan. The United States enters into an FTA with Mexico but not with Taiwan. Consequently, the United States begins to import more goods from Mexico (due to lower tariffs) than from Taiwan, even though the Mexican products are not any better or cheaper. This is most likely an example of ________.

Assume that U.S. companies are importing the same product from Mexico and Taiwan. The United States enters into an FTA with Mexico but not with Taiwan. Consequently, the United States begins to import more goods from Mexico (due to lower tariffs) than from Taiwan, even though the Mexican products are not any better or cheaper. This is most likely an example of ________.

A) trade specialization
B) trade internalization
C) trade creation
D) trade diversion


Answer: D) trade diversion

A free trade agreement is likely to increase efficiency because of ________.

A free trade agreement is likely to increase efficiency because of ________.

A) decreased competition
B) increased competition
C) decreased trade diversion
D) decreased trade creation


Answer: B) increased competition

Since production has shifted to more efficient producers due to comparative advantage, consumers in Country X have had access to more goods at lower prices. Which of the following most likely exists?

Since production has shifted to more efficient producers due to comparative advantage, consumers in Country X have had access to more goods at lower prices. Which of the following most likely exists?

A) trade specialization
B) trade diversion
C) trade creation
D) trade internalization


Answer: C) trade creation

When the European Union was formed, the size of the market increased for European companies. This is most likely an example of a ________.

When the European Union was formed, the size of the market increased for European companies. This is most likely an example of a ________.

A) dynamic effect
B) static effect
C) trade diversion
D) trade reflection


Answer: A) dynamic effect

Trade shifting to countries within a regional trade agreement at the expense of trade with countries not in the agreement is called ________.

Trade shifting to countries within a regional trade agreement at the expense of trade with countries not in the agreement is called ________.

A) a dynamic effect
B) trade creation
C) trade diversion
D) economy of scale


Answer: C) trade diversion

______ effects of economic integration are the overall growth in the market and the impact on a company caused by expanding production and by the company's ability to achieve greater economies of scale.

______ effects of economic integration are the overall growth in the market and the impact on a company caused by expanding production and by the company's ability to achieve greater economies of scale.

A) Dynamic
B) Static
C) Economic
D) Barrier


Answer: A) Dynamic

______ effects of trade agreements are the shifting of resources from inefficient to efficient companies as trade barriers fall.

______ effects of trade agreements are the shifting of resources from inefficient to efficient companies as trade barriers fall.

A) Dynamic
B) Static
C) Economic
D) Barrier


Answer: B) Static

Members of the Andean Community (CAN) have a common external tariff. CAN is most likely a ________.

Members of the Andean Community (CAN) have a common external tariff. CAN is most likely a ________.

A) free trade agreement
B) customs union
C) domestic trade zone
D) free trade sovereignty


Answer: B) customs union

A ________ results when free mobility of factors of production is added to a customs union.

A ________ results when free mobility of factors of production is added to a customs union.

A) customs union
B) common market
C) free trade agreement
D) regional trade agreement


Answer: B) common market

Of the following possibilities, the European Union is best described as a ________.

Of the following possibilities, the European Union is best described as a ________. 

A) customs union
B) domestic organization
C) global bargaining unit
D) common language agreement


Answer: A) customs union

The goal of a ________ is to abolish all tariffs among member countries.

The goal of a ________ is to abolish all tariffs among member countries.

A) customs union
B) common market
C) free trade agreement
D) common internal tariff


Answer: C) free trade agreement

The 27 member EU negotiates trade agreements as one. The EU and Brazil have negotiated a strategic trade alliance which is an example of a ________.

The 27 member EU negotiates trade agreements as one. The EU and Brazil have negotiated a strategic trade alliance which is an example of a ________.

A) customs union
B) global free trade agreement
C) bilateral agreement
D) multilateral agreement


Answer: C) bilateral agreement

Which of the following groups of countries is most likely to form a regional trading group?

Which of the following groups of countries is most likely to form a regional trading group?

A) India, Argentina, France
B) Canada, United States, Mexico
C) Brazil, Ukraine, Japan
D) Spain, South Africa, Mongolia


Answer: B) Canada, United States, Mexico

Most trade groups contain countries in the same area of the world. Why is this so?

Most trade groups contain countries in the same area of the world. Why is this so?

A) The distances that goods need to travel between such countries are short.
B) Distribution channels are not easily established in adjacent countries.
C) Adjacent countries are reluctant to coordinate policies.
D) Neighboring countries usually lack a common history and interests.


Answer: A) The distances that goods need to travel between such countries are short.

A major problem with the Doha Round is that ________.

A major problem with the Doha Round is that ________.

A) developing countries want developed countries to better protect their intellectual property
B) developing countries want a reduction in agricultural subsidies maintained by the developed countries
C) the WTO does not want the developing countries to liberalize their investment rules
D) because of security issues, not all countries were able to attend the meetings, so it was impossible to get a consensus vote


Answer: B) developing countries want a reduction in agricultural subsidies maintained by the developed countries

Under the WTO agreement, ________.

Under the WTO agreement, ________.

A) a dispute resolution mechanism allows countries to bring grievances to the WTO against countries that levy inappropriate trade discrimination measures
B) there is no dispute resolution mechanism except for trade involving environmental products
C) countries are allowed to place trade barriers on member countries with no particular justification, because like GATT the WTO has no enforcement mechanism
D) tariffs are permitted to be levied by developed countries against developing countries but not against each other


Answer: A) a dispute resolution mechanism allows countries to bring grievances to the WTO against countries that levy inappropriate trade discrimination measures

Which of the following accurately identifies a difference between GATT and the WTO?

Which of the following accurately identifies a difference between GATT and the WTO?

A) GATT could enforce member compliance with agreements, but the WTO cannot.
B) At its inception, GATT had more member nations than the WTO currently has.
C) GATT withdrew the most-favored-nation clause, but the WTO reinstated it.
D) GATT rules did not cover trade in services, but the rules of the WTO do.


Answer: D) GATT rules did not cover trade in services, but the rules of the WTO do.

The ________ clause embodied the fundamental principle of GATT—trade without discrimination.

The ________ clause embodied the fundamental principle of GATT—trade without discrimination.

A) most-favored-nation
B) nontariff barriers
C) free rider
D) normal trade relations


Answer: A) most-favored-nation

Which of the following is NOT one of the regions included in the triad regions of the world?

Which of the following is NOT one of the regions included in the triad regions of the world?

A) South America
B) Europe
C) North America
D) Asia


Answer: A) South America

Baldani Manufacturing, an Italian firm, plans to expand into Asia. In order to take advantage of regional trading groups, Baldani will most likely need to change its ________.

Baldani Manufacturing, an Italian firm, plans to expand into Asia. In order to take advantage of regional trading groups, Baldani will most likely need to change its ________. 

A) operating strategies
B) selection test methods
C) bilateral trade agreements
D) economic integration methods


Answer: A) operating strategies

Anderson Enterprises is a U.S. firm that manufactures light fixtures for commercial and residential consumers. Anderson is looking to expand internationally, so the firm should most likely ________.

Anderson Enterprises is a U.S. firm that manufactures light fixtures for commercial and residential consumers. Anderson is looking to expand internationally, so the firm should most likely ________.

A) focus on developing new recruitment strategies and selection tests
B) change their organizational structure to fit the norms of the foreign country
C) disregard changes in trading groups because they have little effect on a company
D) look to expand beyond the triad regions currently controlled by the top 500 MNEs


Answer: B) change their organizational structure to fit the norms of the foreign country

Which of the following statements most accurately describes the relationship between trading groups and MNEs?

Which of the following statements most accurately describes the relationship between trading groups and MNEs?

A) Trading groups have no influence on the size of the regional market.
B) Regional trading groups can define the rules under which companies must operate within that region.
C) Companies never need to change their organizational structure to take advantage of regional trading groups.
D) Regional trading groups have no influence on an MNE's strategy since they operate worldwide.


Answer: B) Regional trading groups can define the rules under which companies must operate within that region.

Global integration occurs as countries from all over the world decide to cooperate through the ________.

Global integration occurs as countries from all over the world decide to cooperate through the ________.

A) EU
B) NAFTA agreement
C) WTO
D) CARICOM


Answer: C) WTO

The European Union is an example of ________ integration.

The European Union is an example of ________ integration.

A) regional
B) relative
C) global
D) bilateral


Answer: A) regional

Country A and Country B make an agreement to cooperate more closely and implement tariff reductions. Which of the following best describes this agreement?

Country A and Country B make an agreement to cooperate more closely and implement tariff reductions. Which of the following best describes this agreement? 

A) double commodity integration
B) multilateral integration
C) regional integration
D) bilateral integration


Answer: D) bilateral integration

______ integration is the political and economic agreements among countries that give preference to member countries to the agreement.

______ integration is the political and economic agreements among countries that give preference to member countries to the agreement.

A) Global
B) Economic
C) Bilateral
D) Regional


Answer: B) Economic