G12 Online review 2

An efficient government subsidy provided in cases of positive production externality, is set equal to the goods:

• Marginal external cost

• Marginal external benefit

• Marginal social benefit

• Price at which MSC = MSB

Which of the following is an advantage of joining a trade bloc?

• Low unemployment

• Low Inflation

• Economies of scale

• Low taxes

What do we call the phenomenon when a new member of a customs union is forced to adopt certain protectionist measures, such as high external tariffs, against a non-member?

• Trade creation

• Trade liberalisation

• Trade production

• Trade diversion

The European Union is a form of monetary union. True or False

• True

• False

Which of the following is not an effect of joining a monetary union for a country?

• Increased trade and investment due to the reduction of price distortions and the risk that goes along with exchange rate fluctuations

• Cheaper imports thanks to the reduced transaction costs when trading with other member countries

• Loss of the ability for the country to set independent fiscal policy

• Loss of the ability for the country to manipulate its exchange rate in order to pursue particular trade strategies

If I sell my holiday home in Greece and then transfer the money back to my home country, under which component of the balance of payments will this transaction be recorded?

• Current account

• Capital account

• Financial account

• It depends

Dumping is a predatory pricing behaviour by firms exporting their goods below the domestic price prevailing in importing countries.

• True

• False

By implementing protectionist tariffs in the market for steel, a government can cause higher unemployment in steel-related industries. 

• True

• False

In a hypothetical scenario, Lebanon decided to place a 15% tariff on the price of Moroccan pitta bread. Which of the following is most likely a reason for this protectionist measure?

• Morocco subsidises its production of pitta bread.

• Lebanon wants to increase the productive efficiency of its domestic firms.

• Morocco has high costs of production for pitta bread.

• Lebanon wants its domestic consumers to enjoy a higher variety of pitta bread in the market.

Which areas represent the total community surplus for the country with free trade? 

(a)