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:

Underapplied Overhead

A situation where the allocated manufacturing overhead is less than the actual overhead incurred.

Factory Overhead

All indirect costs associated with manufacturing, including utilities, maintenance, and salaries of administrative personnel within a factory, but not directly tied to specific units of production.

Overcosted

A situation where the allocated cost of a product or service is greater than the actual cost incurred, leading to potential mispricing or profit loss.

Raw Materials Inventory

A rephrased definition: Stock of basic materials awaiting use in the production process to create finished goods.