______ occurs when a firm disposes on foreign markets a temporary increase in inventories caused by unforeseen changes in supply and demand conditions in the home economy
|a. sporadic dumping|
b. predatory dumping
c. persistent dumping
d. foreign dumping
The Correct Answer Is:
- a. sporadic dumping
The correct answer is a. sporadic dumping. Sporadic dumping occurs when a firm disposes of excess inventories on foreign markets due to temporary and unforeseen changes in supply and demand conditions in the home economy.
This practice can disrupt international trade and competition, but it is different from other forms of dumping. Let’s delve into the details of why this answer is correct and why the other options are not suitable for describing this specific scenario.
a. Sporadic Dumping (Correct Answer):
1. Temporary Surpluses:
Sporadic dumping is characterized by the temporary accumulation of excess inventory by a firm. These surpluses are often the result of unexpected shifts in supply and demand conditions in the home market. For example, a sudden drop in domestic demand or a production surplus might lead to the need to dispose of excess goods.
2. Foreign Market Disposal:
In response to these temporary surpluses, firms may opt to export these excess products to foreign markets at lower prices, disrupting competition in those markets. This can be seen as a form of dumping, but it is driven by short-term challenges rather than a long-term, predatory strategy.
3. Unforeseen Circumstances:
Sporadic dumping is typically not a planned or ongoing practice. It occurs due to unforeseen circumstances, such as supply chain disruptions, changes in consumer preferences, or unexpected economic events that lead to temporary imbalances in supply and demand.
Now, let’s discuss why the other options are not correct:
b. Predatory Dumping:
Predatory dumping is a form of dumping where a firm deliberately prices its products below cost or below fair market value to drive competitors out of the market.
This is a strategic, long-term approach with the intention to establish a monopoly or dominant market position. In contrast, sporadic dumping is driven by temporary surpluses and unforeseen circumstances, not a predatory strategy.
c. Persistent Dumping:
Persistent dumping refers to a consistent and long-term practice where a firm consistently sells its products in foreign markets at prices below fair market value, often with the goal of undermining competitors.
It is characterized by ongoing and sustained efforts to maintain a competitive advantage through lower pricing. Sporadic dumping, as mentioned, is not a continuous or planned practice and is driven by temporary factors.
d. Foreign Dumping:
“Foreign dumping” is not a recognized term in the context of international trade and anti-dumping measures. Dumping, whether sporadic or persistent, occurs when a firm exports products to foreign markets at prices below fair market value or production costs.
The term “foreign dumping” does not add clarity to the concept and is not a commonly used term in trade terminology.
In summary, sporadic dumping is the correct answer, as it describes the practice of firms disposing of temporary surpluses in foreign markets due to unforeseen changes in supply and demand conditions in the home economy.
This practice can disrupt international trade, but it differs from other forms of dumping, such as predatory dumping or persistent dumping, which are characterized by deliberate, long-term strategies aimed at gaining a competitive advantage. The term “foreign dumping” is not a standard term in trade terminology.