European Economics

Question 1

Suppose that the market for bicycles opens between France and Germany, and that Germany exports bicycles to France. In the short term, the total surplus in France:

Answer 1

always increases

Question 2

We consider the market for oranges between France and the UK, and we suppose that France is a net exporter of oranges. Who benefits from this exchange?

Answer 2

French producers and British consumers benefit from international exchanges of oranges

Question 3

Any product lawfully sold in Portugal can be sold in Germany. This is possible even if the Portuguese product does not fully comply with German technical rules.

Answer 3

True

Question 4

We consider the market for apples between France and the UK. Suppose that the autarky price of apples is lower in France. Who will export and who will import apples?

Answer 4

France will export apples and the UK will import apples

Question 5

France and Germany are part of the same customs union. Can French taxes over American imports be different from German taxes over American imports?

Answer 5

No

Question 6

Norway participates in the European Single Market, but is not a member of the EU. Are France and Norway allowed to impose tariffs on their respective imports and exports?

Answer 6

No

Question 7

Suppose that the United States impose a tariff on German cars. What is the impact on US total surplus?

Answer 7

The total surplus in the US can increase or decrease

Question 8

We consider three countries: A, B, and RoW (“Rest of the World”), and the market for a good in which A is an importer while B and RoW are exporters. We suppose that A and B forms a customs union. In terms of total surplus:

Answer 8

The total surplus in B (exporting country in the union) always increases

The total surplus of RoW always decreases

Question 9

Suppose that the price floor is above the world price. Furthermore, the world price is above the European autarky price. The EU buys the excess supply of European farmers at the price floor, and then sell its stock on the world market. What happens to the world price?

Answer 9

The world price decreases

Question 10

Suppose that European farmers are net importers of agricultural goods. If the world price decreases, what will happen to the price floor?

Answer 10

The price floor does not change

Question 11

We consider the market for apples. Suppose that the price floor set by the EU is lower than the European autarky price. Furthermore, the price floor is higher than the world price. Is Europe a net importer or exporter of apples?

Answer 11

With the price floor, Europe is a net importer of apples

Question 12

Suppose that the price floor is set above the world price, and that the world price is also above the European autarky price. In terms of surplus, removing the price floor would then be:

Answer 12

beneficial for EU authorities and European consumers, harmful for European farmers

Question 13

After the successive reforms in the 1990s and 2000s, the main principle governing the CAP became:

Answer 13

to subsidize land ownership

Question 14

Suppose that the price floor is initially higher than the world price, which is also higher than the autarky price. The reform of the CAP with the introduction of decoupled payments ensures that:

Answer 14

compared to the situation before the reform, prices paid by European consumers are now lower

Question 15

What are the consequences in terms of surplus for European farmers of the introduction of decoupled payment?

Answer 15

compared to the situation before the reform, the surplus of European farmers is similar

Question 16

After the implementation of decoupled payments, several of the initial CAP problems have been solved. What is/are however the remaining problem(s)?

Answer 16

budget problem

Unfair distribution of CAP payment

Question 17

Suppose that the euro is strengthening against the dollar (1 euro can now be exchanged against more dollars). What will happen to EU and American exports?

Answer 17

European exports to the USA will probably decrease

American exports to the Eurozone will probably increase

Question 18

Suppose that the initial exchange rate between the French Franc (FF) and the Deutschmark (DM) is 1DM = 2FF, and that the European Community set the price floor for 1 kilo of apples at 5DM/10FF.

Everything else being equal, if the value of the FF decreases to 1DM = 3 FF, is it cheaper to buy apples in France now?

Answer 18

It is now cheaper to buy apples in France

Question 19

A basic Netflix account costs 8.99€ per month in France, and 9.99$ in the United States. Suppose that the exchange rate is 1€ = 1,15$ and that there is no difference between a US and a French account. In which country is the subscription cheaper?

Answer 19

United States

Question 20

Suppose that France and Spain face asymmetric economic shocks. Which of the following conditions can ensure that France and Spain form an optimal currency area?

Answer 20

Workers can freely move between France and Spain
Prices and wages are flexible in France and Spain

Question 21

When wages are set at the level of the “efficiency wage”

Answer 21

The supply of labour is higher than the demand,
there is some involuntary unemployment

Question 22

On the labour market, the supply is expressed by:

Answer 22

The workers

Question 23

When the demand of labour equals the supply of labour,

Answer 23

there is no involuntary unemployment

Question 24

The existence of powerful labour union tends to:

Answer 24

increase wages and decrease employment

Question 25

In the absence of productivity gains, and when labour is perfectly mobile, migration of workers between country L (with low level of wages) to country H (with high level of wages), is beneficial for whom?

Answer 25

is beneficial for workers from L and capitalists from H

Question 26

Suppose that two countries A and B start to trade together. Country A specialises in the production of good X and country B specialises in the production of good Y (meaning A exports good X, while B exports good Y).

Everything else being equal (in particular, there is no gain in productivity and no labour mobility), we can observe in country B:

Answer 26

higher wages and higher employment in the sector producing Y

lower wages and lower employment in the sector producing X

Question 27

Suppose there is a migration from country P to country R. We assume for convenience that there is a single labour market (i.e. there is no distinction between skilled and unskilled workers). Other things being equal:

Answer 27

The effect on wages in country R is ambiguous

Question 28

A producer of shoes in country H considers the possibility to outsource its production in country L. While a worker from country H produces 10 shoes per day and that a worker from country L produces 5 shoes per day, the gross salary per worker in country H is 150 euros per day, and only 90 euros per day in country L.

In which country is it economically advantageous to produce shoes?

Answer 28

Country H

Question 29

The UK is now out of the European Single Market. In principle, as of April 2023, the UK and France can now put tariffs on each other exports

Answer 29

False

Question 30

Which of the following steps were central in the process of economic integration within the European Community?

Answer 30

The launch of the common agricultural policy,

The European Monetary Union

Question 31

The UK is now out of the European Single Market and is not supported any more by the common agricultural policy. Everything else being equal, and knowing that the UK is a net importer of agricultural goods, we can expect food prices in the UK

Answer 31

to increase

Question 32

What are the ‘four freedoms’ of the European Single Market?

Answer 32

Free movement of goods
Free movement of capital
Freedom to establish and provide services
Free movement of persons

Question 33

The traditional “economic” argument against EU integration (which fuels euroscepticism) is:

Answer 33

the EU is too ‘liberal’ and sacrifices national social regulations

Question 34

Suppose that France and Spain face asymmetric economic shocks. Which of the following conditions can ensure that France and Spain form an optimal currency area?

Answer 34

Workers can freely move between France and Spain

Prices and wages are flexible in France and Spain

Question 35

Which is the Treaty that officially founded the European Union?

Answer 35

The Treaty of Maastricht

Question 36

European elections take place every 5 years (the last ones in 2019). Which EU institutions are renewed after European elections?

Answer 36

European Parliament
European Commission

Question 37

As of January 2017 (several months after the referendum), what was the situation of the United Kingdom regarding the European Union?

Answer 37

Member of the European Union
Member of the European Single Market

Question 38

The United Kingdom has left the European Single Market, and does not have to respect the four freedoms anymore. Knowing that we should expect lower migration flows from the EU to the UK:

Answer 38

unemployment in the UK can increase or decrease

Question 39

There are about 38M inhabitants in Poland and 19M in Romania (Poland’s population is about twice Romania’s population). According to the principle of degressive proportionality, in collective decisions:

Answer 39

Poland’s number of votes should be less than two times Romania’s number of votes

Question 40

As of January 2022, which of the following countries are Member States of the EU?

Answer 40

Denmark,
Latvia,
Cyprus

Question 41

The United Kingdom (officially, the ‘United Kingdom of Great Britain and Northern Ireland’) is legally the union of different countries, with a certain degree of autonomy – the UK Parliament is in England, but the three other countries (Wales, Scotland, Northern Ireland) have their own devolved Parliament. Following Brexit, which countries are likely (though this remains largely uncertain) to claim their independence from the UK and possibly break the union in the coming years?

Answer 41

Northern Ireland, Scotland

Question 42

What were the main motives invoked by Brexiters during the referendum in 2016?

Answer 42

The EU imposes too many regulations
Take back control over migration flows
Staying in the EU is costly

Question 43

A key issue in the negotiation of the Withdrawal agreement is the situation of Northern Ireland. Suppose that the UK chooses to respect both the Good Friday Agreement (meaning there is no hard border between Northern Ireland and the Republic of Ireland), and the Common Travel Area (meaning there is no border in the Irish Sea between Great Britain and Northern Ireland).

Under those circumstances:

Answer 43

The UK must stay within the European Single Market

Question 44

All the member States of the EU are affected by the Covid-19 pandemic. Various measures to tackle the health crisis have been (or could be) taken at different levels: e.g. the possibility to emit “Coronabonds” at the EU level, lockdown measures at the national level (e.g. France, Italy, but not Sweden in March/April 2020), and different restrictions at the level of cities (e.g. mask wearing, additional curfew measures).

What is the principle determining which is the adequate “level” to take such decisions?

Answer 44

Subsidiarity

Question 45

Who is the Prime Minister who organised the Brexit referendum in 2016?

Answer 45

David Cameron