WorksheetsCustom Union Fundamentals
Total questions: 30
Worksheet time: 16mins
What is meant by a Custom Union?
An agreement between two countries to increase import tariffs.
Military and political cooperation between countries.
An agreement to remove trade barriers among members and apply a common external tariff.
A shared currency system for developing countries.
An organization that regulates only specific commodities.
Which of the following is an example of a Custom Union?
ASEAN
MERCOSUR
APEC
OPEC
NATO
According to Jacob Viner, the formation of a Custom Union...
Always increases member countries' welfare.
Does not always increase member countries' welfare.
Only benefits developed countries.
Causes losses for all members.
Is purely political.
Which is a characteristic of a Custom Union?
Each member freely sets its own tariffs for non-members.
No free trade among members exists.
Adoption of a common external tariff for non-members.
Applies only to agricultural products.
Allows import quotas among members.
The main objective of a Custom Union is to...
Form a joint military force.
Facilitate free trade among members.
Set a common official language.
Eliminate all domestic taxes.
Create strict immigration policies.
A static benefit of a Custom Union includes...
Technological advancement.
Savings in customs administrative costs.
Labor specialization.
Increased investment.
Economies of scale.
Dynamic benefits of a Custom Union include...
Abolition of income taxes.
Trade creation, competition, and innovation.
Unification of national languages.
Creation of a global currency.
Reduction in labor supply.
What is meant by trade creation?
Shifting imports from efficient to less efficient countries.
Increased trade due to the removal of tariffs among members.
A decline in international trade volume.
Restricting exports to non-members.
Eliminating all forms of trade.
Trade diversion occurs when...
A member country increases exports to non-members.
Imports from an efficient non-member are replaced by imports from a less efficient member.
There is an increase in welfare for all countries.
Internal tariffs are increased.
There is no longer any trade with non-members.
Which of the following is a weakness of a Custom Union?
Increased economic sovereignty of members.
Members can freely set external tariffs.
Erosion of economic sovereignty.
Lack of any common policies.
All members must use the same currency.
Which option best defines economic integration?
A unification of culture and religion
The removal of trade barriers and coordination of economic policies among countries
Cooperation limited to sports events
Creation of a joint military defense system
Merging of all state-owned enterprises
The stage of economic integration that only reduces tariffs but does not eliminate them entirely is called:
Free Trade Area
Custom Union
Common Market
Preferential Trading Area
Economic Union
In which stage are tariffs and quotas eliminated among members, but each country maintains its own tariffs against non-members?
Economic Union
Common Market
Custom Union
Free Trade Area
Total Economic Integration
A Customs Union is an advancement from which earlier arrangement?
Preferential Trading Area
Free Trade Area
Common Market
Economic Union
Total Integration
Which stage features substantial harmonization of national economic policies?
Free Trade Area
Customs Union
Common Market
Economic Union
Preferential Trading Area
Total Economic Integration involves:
Unification of monetary, fiscal, and social policies with supranational institutions
Only free trade with no other policies
Only for high-GDP countries
Elimination of all domestic taxes
Dissolution of national governments
Which of the following is a benefit of economic integration?
Declining trade volumes
Increased specialization and efficiency
Weaker international bargaining position
Reduced labor mobility
Loss of national identity
According to Gerald M. Meier, economic integration can:
Stimulate regional manufacturing industries
Eliminate all domestic industries
Increase dependence on imports
Cause military conflict
Worsen terms of trade
An approach to measuring economic integration that focuses on prices uses the principle of:
Law of One Price
Law of Supply
Comparative Advantage
Absolute Advantage
Balance of Payments
Which quantitative approach is commonly used to measure economic integration?
Total trade relative to GDP
Average inflation rate
Exchange rate level
Population size of the region
Number of manufacturing industries
A key limitation of many methods for measuring economic integration is that they...
Account for differences in economic size
Ignore differences in economic size
Focus only on services
Apply only to developed economies
Avoid using trade data
Which impact of economic integration is considered beneficial?
Trade diversion
Trade creation
Higher tariffs
Lower efficiency
Trade embargoes
Why can trade diversion reduce welfare?
It shifts purchases to less efficient producers
It increases competition
It reduces production costs
It boosts innovation
It opens new markets
A Customs Union tends to be protective toward...
Member countries
Non-member countries
Only domestic firms
All countries equally
Only agricultural products
Which organization is an example of a Customs Union?
European Union
ASEAN
NAFTA
BRICS
G20
In a Customs Union, increasing economies of scale are primarily due to...
Lower production costs and higher output
Hiring more customs officers
Fewer consumers
Import restrictions only
Elimination of manufacturing
Which is a negative impact associated with a Customs Union?
Greater national sovereignty
Uneven distribution of tariff revenues
Easier creation of individual trade agreements
Reduced policy complexity
Higher internal tariffs
Economic integration enables...
Freer mobility of factors of production
Elimination of all domestic taxes
Unification of official languages
Abolition of local governments
Removal of all industries
Strategic reasoning: A regional bloc reduces its common external tariff while maintaining zero internal tariffs. Based on the listed impacts, which outcome is most likely to increase consumer welfare in member states?
Trade creation through access to cheaper imports
Trade diversion toward less efficient member suppliers
Uneven distribution of tariff revenue
Greater protection of non-members
No change in trade patterns
Strategic reasoning: A small member country starts importing a good from a less efficient member because the common external tariff makes non-member imports more expensive. Which concept best explains this outcome and its likely welfare effect?
Trade creation; welfare rises
Trade diversion; welfare may fall
Economies of scale; welfare rises
Protective externality; welfare unchanged
Internal tariff escalation; welfare rises
