a 25 percent tariffin Italy 1.Suppose that steel from Japan faces a 20percent ta

Question

a 25 percent tariffin Italy 1.Suppose that steel from Japan faces a 20percent tariff in France and while France and Italy maintain free trade between each other. France and Italy are therefore part of a (an) a. Free trade area b. Customs union c. Common market d. Economic union Suppose that steel from Japan faces a 20 percent tariff in France and a 25 percent tariff in Italy, while France and Italy maintain free trade between each other. France and Italy are therefore part of a (an) a. Free trade area b. Customs union c. Common market d. Economic union The market power effect of an international joint venture can lead to welfare losses for the domestic economy unless offset by cost reductions. Which type of cost reduction would not lead to offsetting welfare gains for the overall economy? a. R&D; generating improved technology b. Development of more productive machinery c. New work rules promoting worker efficiency d. Lower wages extracted from workers Suppose General Motors charges its Mexican subsidiary $1 million for auto assembly equipment that could be purchased on the open market for $800,000. This practice is best referred to as a. International dumping b. Cost-plus pricing c. Transfer pricing d. Technological transfer

Explanation / Answer

1. a. Free trade area

A free-trade area is referred to member countries who have signed a free-trade agreement, which involves collaboration amongst minimum two countries so as to ease trade barriers and such increase trade of goods and services among each other.

2. d.Lower wages extracted from workers

3. c. Transfer pricing

Charges that are charged for intracompany movement of goods/services from the headquarters to the subsidiaries in another country is termed as transfer pricing.

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