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