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Chapter 21: Q. 44 (page 523)

Microeconomic theory argues that it is economically rationale (and profitable) to sell additional output as long as the price covers the variable costs of production. How is this relevant to the determination of whether dumping has occurred?

Short Answer

Expert verified

It is relevant to dumping because dumping too occurs at prices below the cost of production.

Step by step solution

01

Step1. Introduction

Dumping involves selling the goods in other countries below the cost of producing them. It raises the prices and throws away the competition.

02

Step2. Explanation

The given information is relevant to the determination of whether dumping has occurred is because it happens when the price is less than the variable cost of producing goods. If the variable cost faced by a company is known, then one can determine whether the firm is engaged in dumping by comparing the variable cost and price of the firm.

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Most popular questions from this chapter

How does international trade affect the working conditions of low-income countries?

Explain how a subsidy on agricultural goods like sugar adversely affects the income of foreign producers of imported sugar.

In principle, the benefits of international trade to a

country exceed the costs, no matter whether the country is importing or exporting. In practice, it is not always possible to compensate the losers in a country, for example, workers who lose their jobs due to foreign imports. In your opinion, does that mean that trade should be inhibited to prevent losses?

What are the gains from competition?

The country of Pepperland exports steel to the Land of Submarines. Information for the quantity demanded (Qd) and quantity supplied (Qs) in each country, in a world without trade, are given in Table 21.6 and Table 21.7.

a. What would be the equilibrium price and quantity in each country in a world without trade? How can you tell?

b. What would be the equilibrium price and quantity in each country if trade is allowed to occur? How can you tell?

c. Sketch two supply and demand diagrams, one for each country, in the situation before trade.

d. On those diagrams, show the equilibrium price and the levels of exports and imports in the world after trade.

e. If the Land of Submarines imposes an antidumping import quota of 30, explain in general terms whether it will benefit or injure consumers and producers in each country.

f. Does your general answer change if the Land of Submarines imposes an import quota of 70?
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