Why Would Foreign Firms Export a Product at Less Than

question 16

Essay

Why would foreign firms export a product at less than its cost of production-which presumably means making a loss? This question has two possible answers, discuss both of them.

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Definitions:

Income Elasticity

A measure of how the quantity demanded of a good responds to a change in consumers' income.

Voice Mail

An electronic communication system that allows users to leave voice messages for others to retrieve later.

Disposable Income

The amount of money that households have available for spending and saving after income taxes have been accounted for.

Marginal Revenue

The additional income generated by selling one more unit of a good or service.