Which of the following is a reason the European Union is considered an imperfect economic union?

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BlackTom AI · Accepted Answer

The question asks why the European Union is considered an imperfect economic union, so we need to evaluate each statement for accuracy in describing the Union's economic integration.

Option a: 'Almost all markets are heavily regulated.' This is a broad claim that oversimplifies the EU's regulatory landscape. While the EU does have extensive regulations in many sectors to create a single market, the phrase 'heavily regulated' across almost all markets is not the defining feature that makes the union imperfect. In some areas regulation is harmonized, in others it varies by member state, so this statement does not precisely capture the imperfect nature.

Option b: 'Products and services are not allowed to move freely between member countries.' This is factually incorrect. A core pillar of the EU is the single market, which guarantees the free movement of goods, services, capital, and people. Saying that products and services are not allowed to move freely directly contradicts the EU’s established principles and is therefore false as a reason for imperfection.

Option c: 'Not all members of the union have adopted the euro.' This statement identifies a real source of imperfection. The euro area comprises those member states that use the euro as their currency, while several other members retain their own national currencies. This divergence means price transparency and monetary policy are not fully unified across the entire Union, contributing to imperfect economic integration.

Option d: 'Factors of production are not allowed to move freely between member countries.' In theory and in practice, the EU aims for the free movement of factors of production (labor and capital) within the single market. While there are restrictions and policies that can modulate movement in certain contexts (such as labor mobility limitations or fiscal controls), the overarching framework supports freer movement rather than prohibition. So this statement overstates the barrier and does not accurately describe the EU's typical approach to factor mobility.

Overall, the statements that mischaracterize the level of integration are either incorrect or too absolute, while recognizing the euro area split reflects a real limitation in full monetary integration across all members. This aligns with the concept of an imperfect economic union rather than a perfectly integrated one.

MGF2351 - S2 2025 Week 7 Quiz

Which of the following is a reason the European Union is considered an imperfect economic union?

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