chapter 11

Question 1

dumping

Answer 1

selling exports at a price that is too low - less than normal value

Question 2

predatory dumping

Answer 2

when a firm temporarily charges low prices to run competition out of business, to then increase their prices again - gaining monopoly power

Question 3

cyclical dumping

Answer 3

occurs during periods of recession, when the demand is low a firm lowers its price to limit the decline in quantity sold.

Question 4

seasonal dumping

Answer 4

intended to sell of excess inventories of a product that is not in season.

Question 5

persistent dumping

Answer 5

occurs because a firm with market power uses price discrimination between markets to increase its total profit.the firm can make home-country buyers pay a higher price and this earn a higher total profit - it is not predatory and is not intended to drive out any other firms. long-term

Question 6

antidumping policies

Answer 6

WTO permit countries to retaliate against dumping if the dumping injures domestic import-competing producers - the government can then impose an anti-dumping duty (extra tariff equal to the discrepancy)

Question 7

export subsidy in small country

Answer 7

the export subsidy increases the production of the product, but using the one-dollar one metric it does not benefit the country. the loss of area f (consumption effect) and h (production effect) is greater than gain.

aka, loss for the country and loss for the world

Question 8

export subsidy effect on large exporting country

Answer 8

producer surplus increase (e+f+g) and consumer surplus decrease by (e+f)