If a Foreign Supplier Sells a Good in Another Country

question 11

Multiple Choice

If a foreign supplier sells a good in another country at a cheaper price than it sells the good in its home market, the

• A) foreign supplier will gain a monopoly in the foreign market.
• B) consumers in the receiving country will be harmed by the dumping of the good into its domestic market.
• C) consumers in the receiving country can gain from buying the foreign-produced good if it is cheaper than the cost of producing the good domestically.
• D) usual implications of the law of comparative advantage with trade restrictions do not hold in this case, particularly if the low-cost supplier is subsidized by a foreign government.

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Definitions:

Net Income

The total profit of a company after all expenses, including taxes, cost of goods sold, and operating expenses, have been deducted from total revenue.

Variable Costing

Another perspective: A costing methodology that treats only those costs that vary with production level as product costs, emphasizing the impact of fixed costs on profitability.

Special Order Decisions

Special order decisions involve determining whether a business should accept or decline a custom order that differs from normal sales, considering capacity and costing.

Units Produced

The total quantity of items manufactured by a company during a specific period.