IB International Economics Higher Level (HL) Practice Exam

A Free Trade Area is primarily characterized by the removal of tariffs and other trade barriers between member countries, allowing for the easier exchange of goods and services among them. This facilitates increased mutual trade and enhances economic cooperation, as countries can specialize in producing goods for which they have a comparative advantage without the impediments of trade barriers.

While it's true that each member country in a Free Trade Area maintains its own external tariffs on imports from non-member countries, the essence of the Free Trade Area lies in the cooperation among members to reduce barriers internally. Hence, maintaining individual external tariffs is a feature, but it is not the defining main characteristic of a Free Trade Area, which focuses more on the internal removal of trade restrictions.

The concept of adopting a common external tariff is characteristic of customs unions rather than Free Trade Areas. Furthermore, the free movement of labor and capital is generally associated with economic unions, not specifically Free Trade Areas. Thus, while option C recognizes the fact that member countries keep individual tariffs, it doesn't capture the essence of a Free Trade Area, which is primarily about the elimination of internal trade barriers.