EU economics Quizes

EUEC1
1. Brexit refers to the UK - leaving the EU
2. The last country to join the European Union was –
Croatia
3. With federalism, there are supranational institutions.
With intergovernmentalism, all nations retain all
sovereignty. – True
4. The Constitutional Treaty was accepted by all EU
countries. – False
5. Norway is a member of the EU. - False

EUEC2
1. Charles Michel is - the President of the European
Council
2. The Normalised Banzhaf Index is a quantitative measure
of - the distribution of power between countries
3. Ursula von der Leyen is - the President of the European
Commission
4. According to the Subsidiarity Principle all decisions (all
tasks, all policies) should be taken at the highest possible
level, i.e. the European level, rather than at a lower level
(national, regional or local). – False
5. The passage probability is a quantitative measure of - the
efficiency in decision-making

EUEC3
1. Following the imposition of a tariff the
domestic price increases from PFT to P', while the border
price decreases from PFT to P'-T, then the surface A+B
represents – tariff revenue

2. Suppose the price increases from p* to p'. In

that case, surfaces A and B measure a. - the change in
producer surplus

3. Following the imposition of a tariff

the domestic price increases from PFT to P', while the
border price decreases from PFT to P'-T, then the surface
E represents - the producer surplus

4. Following the imposition of a tariff

the domestic price increases from PFT to P', while the
 border price decreases from PFT to P'-T, then the surface
E+C2+A+C1 represents - the consumer surplus

5. Suppose the price decreases from p* to p'. In

that case, surfaces A and B measure: the change in
consumer surplus

EUEC4
1. Suppose 2 exporting countries (RoW and Partner) and 1
importing country (Home). Suppose that initially the
importing country imposes the same import tariff on both
exporting countries. If Home removes unilaterally
completely the tariff on the imports from Partner but
keeps the same tariff on the imports from the RoW, then
- the domestic price in Home decreases, the border price
in Partner increases and the border price in RoW
decreases
2. The EU is a – Customs Union
3. A Common External Tariff (CET) is - the tariff that a
customs union imposes on the imports coming from
outside the customs union
4. A free trade agreement (FTA) and a custom union (CU)
are exactly the same thing. There is no difference
between the 2. – False
5. Suppose 2 exporting countries (RoW and Partner) and 1
importing country (Home). Suppose that initially the
importing country imposes the same import tariff on both
exporting countries. If Home removes unilaterally
completely the tariff on the imports from Partner but
 keeps the same tariff on the imports from the RoW, then
- the change in welfare for Home is ambiguous, the
welfare of the Partner increases, and the welfare of Row
decreases

EUEC5

1. A monopolist firm that maximises its

profits will choose quantity - Q1 in black
2. If we measure the effect of the formation of a cartel as
the sum of the change in producer surplus and consumers
surplus, then there is never a justification to allow the
formation of a cartel. – False
3. Suppose that in addition to a variable cost with a constant
marginal cost, there is also a fixed cost. In that case,
when the quantity produced by a firm increases - the
average cost decreases
4. Suppose that there are two countries and that they decide
to create an integrated market. In that case, we can
expect, without intervention of States, - the total number
of firms to decrease (less firms in the integrated market
than the sum of number of firms before integration)
5. According to EU law, it is illegal for a firm to have a
dominant position. – False

EUEC6
1. The Solow model tell us that by investing in the creation
of new knowledge and better technologies, this could
compensate the decreasing marginal returns to physical
 capital, and hence potentially have permanent economic
growth – True

2. This is a graph of the Solow model.

The savings rate is s and the depreciation rate is δ. - with
stock (K/L)0, the stock of capital is going to increase
because the investment is higher than depreciation, with
stock (K/L)1, the stock of capital is going to decrease
because the depreciation is higher than investment
3. The Lisbon Strategy is a - an initiative at the European
level to increase research and development as well as
innovation
4. In the Solow model, the assumptions regarding the
production function are: decreasing marginal returns to
physical capital, constant returns to scale, substitution
possibilities between factors of production

EUEC7
1. Technology spillovers are - an agglomeration force

2. Suppose there are 2 regions and the

world is made out of these 2 regions. - the distance 0C
represents income from services located in the North,
distance CB' represents income generally generated in
the industry, distance B'1 represents income from
services located in the South
 3. Local price competition is - a dispersion force
4. With European economic integration and a decrease in
trade costs, the theory predicts that - large regions are
going to attract even more firms
5. In the graph, if the trade costs increase from low to high
trade costs, then the KK curve would - go from green to
blue to red curve

EUEC8
1. If demand is inelastic, then a decrease in price will lead
to - a decrease in total revenue
2. The MacSharry Reform took place in – 1992

3. Suppose the world price is Pw, the floor price

is P and subsidy S', then - farmers gain A+C1+B,
consumers lose A+C1, and the State has to pay
C1+B+C2

4. Suppose supply is S2 and price is P, then

the country is a - net importer
 5. In the graph, at price P, the country is a- net
exporter

EUEC9

1. Suppose you have 2 countries, Home

and Foreign. Value is created using workers and other
factors of production. The decreasing functions are the
respective marginal products of labour. Suppose that
before migration is allowed the distribution of workers is
at L0. With migration - the Home wage decreases and the
Foreign wage increases, the gain for the migrant workers
is given by the sum of surfaces C and D
2. The effect of product market integration on
unemployment - cannot be determined a priori and will
depend on the characteristics of the collective
negotiations and individual supply functions

3. Using the numbers above, the marginal

product of the third worker is – 40
 4. Suppose the collective negotiations
supply function is given by Scoll while the individual
supply function is given by S. The demand function for
labour is given by D. In that case, the amount of
unemployment is given by - A'B'
5. The economic reason for allowing migration between 2
countries is that - for the two countries there is an overall
net welfare gain

EUEC10

1. With an expansionary monetary

policy, in the IS-LM framework - the LM curve shifts to
LM', the LM curve shifts to LM', then the IS curve shifts
to IS'
2. With a fixed exchange rate regime - the monetary policy
is ineffective and the fiscal policy is effective
3. If the inflation rate in France is 10% and the inflation
rate in Switzerland is 5%, and the French franc
appreciates in nominal terms by 5% with respect to the
Swiss franc, then the real exchange rate of the Franc with
 respect to the Swiss franc would - appreciate by 10%

4. With an expansionary fiscal policy, in

the IS-LM framework - the IS curve shifts to IS', the IS
curve shifts to IS', then the LM curve shifts to LM'
5. With a flexible exchange rate regime - the monetary
policy is effective and the fiscal policy is ineffective

EUEC11
1. The Eurozone satisfies the OCA criterion of having fiscal
transfers between member countries. – False
2. The Kenen criterion - is an economic OCA criterion, says
that members of an OCA should have similar and
diversified production structures
3. The Mundell criterion - is an economic OCA criterion,
says that there should be labour mobility between
members of an OCA
4. One of the reason why countries that share a common
currency should satisfy a certain number of OCA criteria
is because asymmetric shocks can have a negative impact
on this type of union. – True
5. The McKinnon criterion - is an economic OCA criterion,
says that members of an OCA should have an openess to
trade
EUEC12
1. Select the all the correct arguments in favour and against
limiting the fiscal independence of countries - income
spillovers are an argument in favour, the fact that the
fiscal policy is within the EMU the only remaining
macroeconomic instrument for countries is an argument
against
2. The no-bailout clause means that - if a country cannot
repay its public debt, it cannot be help by other countries
or EU institutions
3. The corrective arm aims at having surpluses in years
when when economic growth is positive and the
preventive arm aims at avoiding to reach the 3%
threshold of public deficit. – False
4. According to the EDP, the public deficit of a country
cannot be higher than - 3% of GDP
5. According to the EDP, the public debt of a country
cannot be higher than - 60% of GDP