A Firm Charges a Lower Price in Another Country Than

question 50

Multiple Choice

A firm charges a lower price in another country than it does for the same product in its home country may be a simple case of price discrimination. (For example, "international editions" of textbooks are much lower than the American edition.) To prove dumping, it must be shown that

• A) the consumers in the home country have a lower price elasticity of demand than consumers in the foreign country.
• B) the government in the home country did not subsidize production of the good.
• C) the item can be produced in the foreign country.
• D) the cost of production is higher than the price the firm charges for the good.
• E) All of these could be used to prove dumping.

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Definitions:

Relative Price

The price of a good or service in comparison to the price of other goods and services.

Indifference Curves

Graphical representations of different bundles of goods among which a consumer is indifferent, showing levels of utility that are equivalent to the consumer.

Transitivity

In decision theory, the principle that if a person prefers option A to option B and prefers option B to option C, then the person should prefer option A to option C.

Intersect

The point at which two or more lines or curves meet or cross each other.