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The term ‘Dumping’ refers to
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- The sale of a sub-standard commodity
- Sale in a foreign market of a commodity at a price below marginal cost
- Sale in a foreign market of a commodity just at marginal cost with too much of profit
- Smuggling of goods without paying any customs duty
Correct Option: B
Dumping is an international price discrimination in which an exporter firm sells a portion of its output in a foreign market at a very low price and the remaining output at a high price in the home market. This is done to turn out foreign competitors from the domestic market. If the foreign market is perfectly competitive, the firm may lower the price in comparison with other competitors so that the demand for it may increase. In such a situation, the firm may sell the commodity even below marginal cost of production, incurring loss in the foreign market (International Economics by M. Maria John Kennedy, p.122).
