Question

Which of the following refers to dumping?

	Selling domestic goods in the international market at much lower prices.
	Selling domestic goods of inferior quality in the international markets at higher prices.
	Restricting the sale of domestic goods within the geographic boundary of the country.
	Selling domestic goods at discounted prices to the local consumers and selling the same at much higher prices to the foreign consumers.

Answer 1

Selling domestic goods in the international market at much lower prices.

Dumping is an example of price discrimination. As we know price discrimination is practice of charging different customers different prices. The most common form of P.D in International Trade is dumping. Dumping is a pricing practice in which firm charge lower price for exported goods and sell same commodity at higher price domestically.

Dumping occur only when following conditions are satisfied:

1) Industry must be imperfectly competitive so that firms can set price.

2) Markets must be segmented so that domestic residents cannot easily purchase goods intended for exports.