Solution for QID #70153: 1) Where member countries reduce or abolish restrictions on | StudyHelpMe

1) Where member countries reduce or abolish restrictions on trade between each other while   maintaining their individual protectionist measures against non-members is called a     Common Market   Customs Union   Economic Union   Free Trade Area 2) Suppose that Mexico and Canada form a free-trade area. Mexicans then decrease auto manufacturing and increase imports of autos from Canada, while the Canadians decrease computer production and import more computers from Mexico. This is an example of:     Trade diversion   Trade creation   Trade destruction   Trade exhaustion 3) Suppose Nauru is a small country that can import “rice” at the world price. There is a positive production externality from domestic rice production that producers cannot appropriate. Specifically, this means that each unit of rice produced yields a marginal external social benefit. Which of the following policies should be implemented by Nauru to address this market failure if the goal is to maximize social welfare?     A tariff on rice imports   An export subsidy for rice exports   A quota on rice imports   A production subsidy for domestic rice production 4) Suppose a country imports wheat at the world price and that the domestic production of wheat in that country is subject to positive externality. In such a case, a production subsidy would be better than a tariff to address the market failure as     production subsidy can increase government revenue   tariff does not affect producer or consumer surplus   production subsidy does not affect consumer surplus   tariff can decrease government revenue