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ECON 3923 WI01 International Trade Theory 2025 Winter

ECON 3923 WI01 International Trade Theory 2025 Winter

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According to the rules of the GATT and WTO, the most-favoured-nation principle refers to:

A trade creating customs union

extension to all trade partners of any reciprocal tariff reduction negotiated by a country with any of its trade partners

multilateral trade negotiations

the International Trade Organization itself

the General Agreement on Tariffs and Trade

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Free International trade can be based on economies of scale even if both nations

have Identical factor endowments, tastes, and technology

impose high optimal tariffs on each other imports

insist on producing the same amounts of all differentiated products for national security reasons

retaliate on each other with high optimal tariffs

all of the above

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Which of the following describes a case in which there are likely to be net benefits from a customs union?

There are low barriers to trade prior to the union.

The union includes countries with the least-cost producers of the world traded goods.

The countries are a larger geographic distance from each other.

The countries are complementary rather than competitive.

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For a small country, a leftward shift in the demand curve of the imported product subject to a given fixed import quota:

increases the country’s production of the product

increases the producers' surplus

increases the domestic price of the product

reduces the country’s quantity demanded of the product

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Which one of the following statements is correct?

a customs union is a higher form of economic integration than a common market

in a free-trade area, member nations harmonize their monetary and fiscal policies

In a customs union, member nations apply a uniform tariff to imports from non-member countries

in a customs union, member nations harmonize their monetary and fiscal policies

within a customs union there is unrestricted factor movement

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The imposition of a tariff on its imported product by the government of a small country will

Decrease imports, decrease domestic production, and increase the quantity demanded of the product

Decrease imports, increase domestic production, and decrease the quantity demanded of the product

Increase imports, increase domestic production, and decrease the quantity demanded of the product

Increase imports, decrease domestic production, and increase the quantity demanded of the product

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A customs union that allows for the free movement of labour and capital among its member nations is called:

A Preferential trade arrangement

A Free-trade area

All of the above, a) and b).

A common market

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If its trade partners do not retaliate, the imposition of an optimal tariff by the government of a large country on its imports will:

Benefit the world but not the country

Not benefit the country or the world

benefit the country and the world

benefit the country but not the world

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An rightward shift of the demand curve of an imported product that is subject to a given import quota:

Reduces the domestic price of the product and benefit the consumers of the product

Increases the domestic producers' surplus or profit and does not increase the total government revenues

Reduces the domestic quantity demanded of the product

Reduces the domestic producers' surplus or profit but increases the total government revenues

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Let X be a product for which the output of domestic producers of a small nation at the product’s international price is smaller than the quantity demanded of it by domestic consumers at its international price. The small nation imports the difference. If the small nation imposes a tariff on the imports of X, then

The price received by the domestic producers of X does not change and remains equal to the world price of the product

The quantity produced by domestic producers of X decreases

The profits of the domestic producers of X increase

The profits of the domestic producers of X decrease

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