What occurs when a company practices dumping in international trade?

• A. It imports goods from foreign markets at prices above the domestic market price.
• B. It sets export quotas to limit the amount of goods sold abroad.
• C. It refuses to export goods to countries with lower tariffs.
• D. It sells its products in a foreign market at a price below their cost of production.

Answer: (D)

Verified step by step guidance

1. Understand the concept of dumping in international trade: Dumping occurs when a company sells its products in a foreign market at a price lower than the cost of production or lower than the price in its domestic market.
2. Recognize that dumping is a strategy used to gain market share in the foreign market by offering goods at artificially low prices, which can harm local producers in the importing country.
3. Identify that dumping is different from importing goods at higher prices, setting export quotas, or refusing to export due to tariffs; these are separate trade practices or policies.
4. Recall that the key characteristic of dumping is the sale of goods abroad at prices below production cost or domestic prices, often to undercut competitors.
5. Conclude that the correct description of dumping is: a company sells its products in a foreign market at a price below their cost of production.