The form of international price discrimination (dumping) normally associated with economic recession or excess inventories in the exporting nation is known as
|a. predatory dumping|
b. sporadic dumping
c. persistent dumping
d. year-end dumping
The Correct Answer Is:
- b. sporadic dumping
The correct answer to the question is “b. sporadic dumping.” Let’s explore in detail why this answer is correct and why the other options are not:
Sporadic Dumping (Correct Answer):
Sporadic dumping is a form of international price discrimination typically associated with economic recessions or excess inventories in the exporting nation. It involves occasional or irregular instances of dumping where a country temporarily sells its goods in foreign markets at prices lower than their fair market value.
This practice is driven by the need to alleviate economic pressures such as overproduction or excess inventories, which can occur during economic downturns.
During a recession, domestic demand for goods and services tends to decrease, which can lead to surplus production. To clear excess inventories, producers may resort to sporadic dumping by selling goods in international markets at prices lower than what they would typically charge.
This helps prevent their domestic markets from being flooded with unsold goods, which can lead to further price reductions and financial losses. Sporadic dumping is typically not a long-term strategy but a short-term measure to address immediate economic challenges.
As a result, the correct answer is “b. sporadic dumping” because this form of dumping corresponds with the economic conditions mentioned in the question.
Predatory Dumping (Incorrect Answer):
Predatory dumping is a strategy where a company deliberately sells its products in foreign markets at prices significantly below their production cost or fair market value.
The aim of predatory dumping is to drive competitors out of the market by undercutting their prices to unsustainable levels. This answer is incorrect for this scenario because predatory dumping is not typically associated with economic recessions or excess inventories. Instead, it is a strategy employed to gain market share and eliminate competition.
Persistent Dumping (Incorrect Answer):
Persistent dumping, as the name suggests, involves a sustained and consistent pattern of selling goods at prices lower than their fair market value in foreign markets. This is often done to maintain a dominant position in those markets. Unlike sporadic dumping, which is temporary and occasional, persistent dumping continues over an extended period.
This answer is not correct for the scenario mentioned in the question because it does not align with the idea of addressing recession-induced economic challenges through occasional, irregular price reductions.
Year-End Dumping (Incorrect Answer):
Year-end dumping is not a well-recognized term in the context of international trade. Dumping typically occurs in response to economic conditions, excess inventories, or competition rather than being tied to a specific time of the year. Therefore, this answer is not correct because “year-end dumping” is not a widely accepted or commonly used term in trade discussions.
In conclusion, “sporadic dumping” is the correct answer because it accurately reflects the occasional and irregular practice of selling goods in foreign markets at reduced prices during economic recessions or when there are excess inventories in the exporting nation.
Predatory dumping is not the correct answer because it is a strategy aimed at eliminating competition, not addressing economic challenges.
Persistent dumping involves a sustained pattern of underpricing and does not align with the sporadic nature of the dumping described in the question. Year-end dumping is not a recognized term in the context of international trade and is not related to economic conditions or excess inventories.