In the context of international dumping, which of the following statements about
ID: 1140216 • Letter: I
Question
In the context of international dumping, which of the following statements about the price- or cost-based definitions of foreign market value are correct? Check all that apply.
According to the priced-based definition, dumping occurs whenever a foreign firm sells a product at a price above its home market price.
According to the cost-based definition, dumping occurs when foreign merchandise is sold in the domestic market at more than fair value.
Governments often reward foreign companies that dump commodities in the home economy at a price that is less than average total costs.
According to the cost-based definition, dumping occurs when foreign merchandise is sold in the domestic market at less than fair value.
Explanation / Answer
Dumping refers to a situation when "as per the cost based definition, occurs when foreign merchandise is sold in the domestic market at less than fair value". In such a situation there are more and more foreign products available in the domestic market at very low prices as compared to the home prices, which leads to more demand and sale of foreign goods.
This causes great harm to domestic producers and manufacturer who are hit by less demand for their products. Due to:
1. high prices of domestic products in comparison to foreign goods.
2. the high prices are due to the good quality and durability of the products in the home country, but the cheap dumped goods from the foreign market are those goods which are of low quality and lack of durability as well. And hence are available at low prices in other countries.
3. demand is in an inverse relationship with prices and therefore lesser the price of the product more is the demand for the same.