When free trade areas are set up the member countries trade with each other grows faster than their trade with other countries This is due to what economist call ?

Related Mcqs:

1. If two countries start with the same real GDP/person and one country grows at 2 percent while the other grows at 4 percent ?

   A. one country will always have 2 percent more real GDP/person than the other
   B. the standard of living in the country growing at 4 percent will start to accelerate away from the slower growing country due to compound growth
   C. the standard of living in the two countries will converge
   D. Next year the country growing at 4 percent will have twice the GDP/person as the country growing at 2 percent

2. A ____ is a regional trading bloc in Which member countries eliminate internal trade barriers but maintain existing barriers against countries that are not member ?

   A. free trade area
   B. customs union
   C. common market
   D. monetary union

3. An export quota agreement to stabilize the price of bauxite tends to be more successful when the member producer countries as a percentage of the world’s producer countries is __________ and the _________ it is for the member producer countries to store/stock pile bauxite?

   A. relatively small; more difficult
   B. relatively small; easier
   C. relatively large; more difficult
   D. relatively large; easier

4. The Setrite Corporation produce chairs. An economist working for the firm predicts that if people’s incomes rise next year, then the demand for our chairs will for our chairs will increase ceteris paribus The accuracy of the economist’s prediction depends on whether the chairs Setrite Produce ?

   A. have few substitutes.
   B. are normal goods
   C. have few complementary goods.
   D. have many complementary goods.

5. Suppose two economists are arguing about policies that deal with unemployment. One economist says. The government could lower unemployment by one percentage point if it would just increase government spending by 50 billion dollars the other economist responds Nonsense and poppycock! If the government spent an additional 50 billion dollars it would reduce unemployment by only one tenth of one percent. and that effect would only be temporary! These economists ?

   A. None of these answers
   B. Disagree because they have different scientific judgments
   C. really don’t disagree at all. It just appears that they disagree
   D. disagree because they have different values

6. Suppose two economists are arguing about policies that deal with unemployment One economist says the government should fight unemployment because it is the greatest social evil The other economist response Nonsense Inflation is the greatest social evil These economists ?

   A. really don’t disagree at all It just appears that they disagree.
   B. disagree because they have different values.
   C. none of these answers.
   D. disagree because they have different scientific judgments.

7. ________ is said to exist when the formation of a regional trading group leads to the reduction of trade with nonmember countries in favor of member countries ?

   A. trade creation
   B. trade diversion
   C. trade exclusion
   D. trade distortion

8. With free trade, suppose that the rest of the world can supply calculators to Canada at a price of $30. Canada’s imports would now equal _____ and its consumer surplus would ____ relative to what occurred in the absence of trade. What is the change in consumer surplus? Refer to the figure that you have plotted ?

   A. 20 calculators increase
   B. 25 calculators decrease
   C. 25 calculators increase
   D. 30 calculators increase

9. Given free trade, small nations tend to benefit the most from trade since they ?

   A. Are more productive than their large trading partners
   B. Are less productive than their large trading partners
   C. Have demand preferences and income levels lower than their large trading partners
   D. Realize terms of trade lying near the MRTs of their large trading partners

10. Under free trade, Canada would not realize any gains from trade with Sweden if Canada ?

    A. Trades at Canada’s marginal rate of transformation
    B. Trade at Sweden’s marginal rate of transformation
    C. Specializes completely in the production of its export good
    D. Specializes partially in the production of its exports goods