Hill12e Chapter 09 TB Answer Key PDF

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1 Copyright 2019 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the priorInternational Business, 12e (Hill)Chapter 9 Regional Economic Integration Charlyce lives in a country where there are no barriers to the trade of goods and services. This is called a free ...

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International Business, 12e (Hill) Chapter 9

Regional Economic Integration

1) Charlyce lives in a country where there are no barriers to the trade of goods and services. This is called a free trade area. Answer: TRUE Explanation: In a free trade area, all barriers to the trade of goods and services among member countries are removed. Difficulty: 1 Easy Topic: Overview of Trade Learning Objective: 09-01 Describe the different levels of regional economic integration. Bloom's: Remember AACSB: Knowledge Application Accessibility: Keyboard Navigation 2) In a customs union, trade barriers are eliminated among member countries, and each country maintains its own external trade policies. Answer: FALSE Explanation: A customs union eliminates trade barriers between member countries and adopts a common external trade policy. Difficulty: 1 Easy Topic: Overview of Trade Learning Objective: 09-01 Describe the different levels of regional economic integration. Bloom's: Remember AACSB: Knowledge Application Accessibility: Keyboard Navigation 3) The European Union is an example of a perfect economic union. Answer: FALSE Explanation: The EU is an economic union, although an imperfect one because not all members have adopted the euro. Difficulty: 1 Easy Topic: Overview of Regional Economic Integration and its Different Levels Learning Objective: 09-01 Describe the different levels of regional economic integration. Bloom's: Understand AACSB: Knowledge Application Accessibility: Keyboard Navigation

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4) Coordination and policy harmonization problems are largely a function of the number of countries that seek agreement. Answer: TRUE Explanation: The greater the number of countries involved, the more perspectives that must be reconciled, and the harder it will be to reach agreement. Difficulty: 1 Easy Topic: Overview of Regional Economic Integration and its Different Levels Learning Objective: 09-02 Understand the economic and political arguments for regional economic integration. Bloom's: Understand AACSB: Knowledge Application Accessibility: Keyboard Navigation 5) Because of the fact that everyone benefits from economic integration, it is easy to achieve and sustain. Answer: FALSE Explanation: While a nation as a whole may benefit significantly from a regional free trade agreement, certain groups will lose, at least in the short to medium term. Difficulty: 2 Medium Topic: Economic and Political Arguments Surrounding Regional Economic Integration Learning Objective: 09-02 Understand the economic and political arguments for regional economic integration. Bloom's: Understand AACSB: Knowledge Application Accessibility: Keyboard Navigation 6) Concerns about national sovereignty in the EU have been a major impediment to economic integration. Answer: TRUE Explanation: A major impediment to integration arises from concerns over national sovereignty because close economic integration demands that countries give up some degree of control over such key issues as monetary policy, fiscal policy (e.g., tax policy), and trade policy. Difficulty: 1 Easy Topic: Economic and Political Arguments Surrounding Regional Economic Integration Learning Objective: 09-02 Understand the economic and political arguments for regional economic integration. Bloom's: Understand AACSB: Knowledge Application Accessibility: Keyboard Navigation

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7) A regional free trade agreement will benefit the world only when the amount of trade it creates exceeds the amount of trade it diverts. Answer: TRUE Explanation: A regional free trade agreement will benefit the world only if the amount of trade it creates exceeds the amount it diverts. Difficulty: 2 Medium Topic: Economic and Political Arguments Surrounding Regional Economic Integration Learning Objective: 09-03 Understand the economic and political arguments against regional economic integration. Bloom's: Understand AACSB: Knowledge Application Accessibility: Keyboard Navigation 8) The Treaty of Rome, signed in 1957, established the European Free Trade Association. Answer: FALSE Explanation: With the signing of the Treaty of Rome in 1957, the European Community was established. Difficulty: 1 Easy Topic: History and Implications Regional Economic Agreements Learning Objective: 09-04 Explain the history, current scope, and future prospects of the world's most important regional economic agreements. Bloom's: Remember AACSB: Knowledge Application Accessibility: Keyboard Navigation 9) A central reason for the establishment of the EU was the devastation of Western Europe during two world wars and the desire for a lasting peace. Answer: TRUE Explanation: The European Union (EU) is the product of two political factors: (1) the devastation of Western Europe during two world wars and the desire for a lasting peace, and (2) the European nations' desire to hold their own on the world's political and economic stage. Difficulty: 2 Medium Topic: History and Implications Regional Economic Agreements Learning Objective: 09-04 Explain the history, current scope, and future prospects of the world's most important regional economic agreements. Bloom's: Understand AACSB: Knowledge Application Accessibility: Keyboard Navigation

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10) The Council of the European Union is responsible for proposing EU legislation, implementing it, and monitoring compliance with EU laws by member states. Answer: FALSE Explanation: The European Commission is responsible for proposing EU legislation, implementing it, and monitoring compliance with EU laws by member states. Difficulty: 1 Easy Topic: History and Implications Regional Economic Agreements Learning Objective: 09-04 Explain the history, current scope, and future prospects of the world's most important regional economic agreements. Bloom's: Remember AACSB: Knowledge Application Accessibility: Keyboard Navigation 11) The judges of the European Court of Justice are required to act as representatives of national interests, rather than as independent officials. Answer: FALSE Explanation: The judges are required to act as independent officials, rather than as representatives of national interests. Difficulty: 1 Easy Topic: History and Implications Regional Economic Agreements Learning Objective: 09-04 Explain the history, current scope, and future prospects of the world's most important regional economic agreements. Bloom's: Remember AACSB: Knowledge Application Accessibility: Keyboard Navigation 12) The Single European Act committed EU countries to adopting a common currency by January 1, 1999. Answer: FALSE Explanation: In February 1992, EC members signed the Maastricht Treaty that committed them to adopting a common currency by January 1, 1999. Difficulty: 1 Easy Topic: History and Implications Regional Economic Agreements Learning Objective: 09-04 Explain the history, current scope, and future prospects of the world's most important regional economic agreements. Bloom's: Remember AACSB: Knowledge Application Accessibility: Keyboard Navigation

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13) Establishment of the euro created the largest currency zone in the world, replacing the position the U.S. dollar had held for decades. Answer: FALSE Explanation: By adopting the euro, the EU has created the second most widely traded currency in the world after that of the U.S. dollar. Difficulty: 1 Easy Topic: History and Implications Regional Economic Agreements Learning Objective: 09-04 Explain the history, current scope, and future prospects of the world's most important regional economic agreements. Bloom's: Remember AACSB: Knowledge Application Accessibility: Keyboard Navigation 14) A key benefit resulting from the adoption of the euro is the ability to compare prices across member markets. Answer: TRUE Explanation: The adoption of a common currency makes it easier to compare prices across Europe. This has been increasing competition because it has become easier for consumers to shop around. Difficulty: 2 Medium Topic: History and Implications Regional Economic Agreements Learning Objective: 09-04 Explain the history, current scope, and future prospects of the world's most important regional economic agreements. Bloom's: Understand AACSB: Knowledge Application Accessibility: Keyboard Navigation 15) The implied loss of national sovereignty to the European Central Bank (ECB) underlies the decision by Great Britain, Denmark, and Sweden to stay out of the euro zone for now. Answer: TRUE Explanation: The implied loss of national sovereignty to the ECB underlies the decision by Great Britain, Denmark, and Sweden to stay out of the euro zone. Difficulty: 2 Medium Topic: History and Implications Regional Economic Agreements Learning Objective: 09-04 Explain the history, current scope, and future prospects of the world's most important regional economic agreements. Bloom's: Understand AACSB: Knowledge Application Accessibility: Keyboard Navigation

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16) Since its establishment, the euro has had a stable trading history. Answer: FALSE Explanation: Since its establishment January 1, 1999, the euro has had a volatile trading history against the world's major currency, the U.S. dollar. Difficulty: 2 Medium Topic: History and Implications Regional Economic Agreements Learning Objective: 09-04 Explain the history, current scope, and future prospects of the world's most important regional economic agreements. Bloom's: Understand AACSB: Knowledge Application Accessibility: Keyboard Navigation 17) The Andean Pact is a highly successful common market modeled after the EU. Answer: FALSE Explanation: The Andean Pact was largely based on the EU model, but was far less successful at achieving its stated goals. Difficulty: 1 Easy Topic: History and Implications Regional Economic Agreements Learning Objective: 09-04 Explain the history, current scope, and future prospects of the world's most important regional economic agreements. Bloom's: Understand AACSB: Knowledge Application Accessibility: Keyboard Navigation 18) Political turmoil in several African nations has persistently impeded any meaningful progress in economic integration. Answer: TRUE Explanation: Significant political turmoil in several African nations has persistently impeded any meaningful progress. Difficulty: 2 Medium Topic: History and Implications Regional Economic Agreements Learning Objective: 09-04 Explain the history, current scope, and future prospects of the world's most important regional economic agreements. Bloom's: Understand AACSB: Knowledge Application Accessibility: Keyboard Navigation

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19) A benefit to companies of economic integration is the opportunity to centralize their production and reduce costs. Answer: TRUE Explanation: Rather than producing a product in each of the 27 EU countries or the three NAFTA countries, a firm may be able to serve the whole EU or North American market from a single location. Difficulty: 2 Medium Topic: The Debate Concerning Global and Regional Economic Integration Learning Objective: 09-05 Understand the implications for business that are inherent in regional economic integration agreements. Bloom's: Understand AACSB: Knowledge Application Accessibility: Keyboard Navigation 20) Once the barriers to trade and investment are removed, companies are able to realize cost economies by centralizing production in key locations and producing a standardized product for a single multiple-country market. Answer: FALSE Explanation: This is hampered by differences in culture and competitive practices, limiting companies' ability to realize cost economies. Difficulty: 2 Medium Topic: The Debate Concerning Global and Regional Economic Integration Learning Objective: 09-05 Understand the implications for business that are inherent in regional economic integration agreements. Bloom's: Understand AACSB: Knowledge Application Accessibility: Keyboard Navigation

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21) From least integrated to most integrated, the levels of economic integration are a: A) common market, a free trade area, an economic union, a customs union, and a political union. B) free trade area, a customs union, a common market, an economic union, and a political union. C) customs union, a free trade area, a common market, a political union, and an economic union. D) common market, an economic union, a customs union, a free trade area, and a political union. Answer: B Explanation: Several levels of economic integration are possible in theory. From least integrated to most integrated, they are a free trade area, a customs union, a common market, an economic union, and, finally, a full political union. Difficulty: 2 Medium Topic: Overview of Regional Economic Integration and its Different Levels Learning Objective: 09-01 Describe the different levels of regional economic integration. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 22) Which level of economic integration eliminates trade barriers between member countries and adopts a common external trade policy? A) political union B) customs union C) common market D) economic union Answer: B Explanation: A customs union eliminates trade barriers between member countries and adopts a common external trade policy. Establishment of a common external trade policy necessitates significant administrative machinery to oversee trade relations with nonmembers. Difficulty: 1 Easy Topic: Overview of Regional Economic Integration and its Different Levels Learning Objective: 09-01 Describe the different levels of regional economic integration. Bloom's: Remember AACSB: Knowledge Application Accessibility: Keyboard Navigation

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23) Which feature of a common market differentiates it from a customs union? A) requires harmonization of members' tax rates B) has a common currency C) holds a common external trade policy toward nonmembers D) allows factors of production to move freely among members Answer: D Explanation: In a common market, labor and capital are free to move because there are no restrictions on immigration, emigration, or cross-border flows of capital between member countries. Difficulty: 2 Medium Topic: Overview of Regional Economic Integration and its Different Levels Learning Objective: 09-01 Describe the different levels of regional economic integration. Bloom's: Apply AACSB: Reflective Thinking Accessibility: Keyboard Navigation 24) ________ involves the free flow of products and factors of production between member countries, the adoption of a common external trade policy, a common currency, harmonization of members' tax rates, and a common monetary and fiscal policy. A) An economic union B) A common market C) A customs union D) A free trade area Answer: A Explanation: An economic union involves the free flow of products and factors of production between member countries, the adoption of a common external trade policy, a common currency, harmonization of members' tax rates, and a common monetary and fiscal policy. Difficulty: 1 Easy Topic: Overview of Regional Economic Integration and its Different Levels Learning Objective: 09-01 Describe the different levels of regional economic integration. Bloom's: Remember AACSB: Knowledge Application Accessibility: Keyboard Navigation

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25) Which is the most enduring free trade area in the world? A) Central America Free Trade Association (CAFTA) B) European Free Trade Association (EFTA) C) Association of Southeast Asian Nations (ASEAN) D) North American Free Trade Association (NAFTA) Answer: B Explanation: The most enduring free trade area in the world is the European Free Trade Association (EFTA). Established in January 1960, EFTA currently joins four countries—Norway, Iceland, Liechtenstein, and Switzerland—down from seven in 1995. EFTA was founded by those Western European countries that initially decided not to be part of the European Community. The emphasis of EFTA has been on free trade in industrial goods. Agriculture was left out of the arrangement, each member being allowed to determine its own level of support. Members are also free to determine the level of protection applied to goods coming from outside the EFTA. Difficulty: 2 Medium Topic: Overview of Regional Economic Integration and its Different Levels Learning Objective: 09-01 Describe the different levels of regional economic integration. Bloom's: Apply AACSB: Knowledge Application Accessibility: Keyboard Navigation 26) Which feature of an economic union differentiates it from a common market? A) Free flow of products and factors of production between member countries B) a common monetary and fiscal policy C) a common external trade policy toward nonmembers D) ability of factors of production to move freely between members Answer: B Explanation: An economic union entails even closer economic integration and cooperation than a common market. Like the common market, an economic union involves the free flow of products and factors of production among member countries and the adoption of a common external trade policy, but it also requires a common currency, harmonization of members' tax rates, and a common monetary and fiscal policy. Difficulty: 2 Medium Topic: Overview of Regional Economic Integration and its Different Levels Learning Objective: 09-01 Describe the different levels of regional economic integration. Bloom's: Apply AACSB: Reflective Thinking Accessibility: Keyboard Navigation

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27) Which of the following is a reason the European Union is considered an imperfect economic union? A) Factors of production are not allowed to move freely between member countries. B) Not all members of the union have adopted the euro. C) Almost all markets are heavily regulated. D) Products and services are not allowed to move freely between member countries. Answer: B Explanation: The EU is an economic union, although an imperfect one because not all members of the EU have adopted the euro, the currency of the EU; differences in tax rates and regulations across countries still remain; and some markets, such as the market for energy, are still not fully deregulated. Difficulty: 2 Medium Topic: Overview of Regional Economic Integration and its Different Levels Learning Objective: 09-01 Describe the different levels of regional economic integration. Bloom's: Understand AACSB: Knowledge Application Accessibility: Keyboard Navigation 28) The move toward economic union raises the issue of how to make a coordinating bureaucracy accountable to the citizens of member nations. Which of the following offers a solution to this problem? A) a common market B) a free trade area C) a customs union D) a political union Answer: D Explanation: The move toward economic union raises the issue of how to make a coordinating bureaucracy acc...