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Chapter 34: Q. 28. (page 832)

What is dumping? Why does prohibiting it often work better in theory than in practice?

Short Answer

Expert verified

Prohibition of dumping only work better in theory than in practice.

Step by step solution

01

Step 1. Meaning of dumping.

In economics, dumping is a term used in the context of international trade. It occurs when a country or a company exports a product at a price which is lower in the foreign importing market than the price in the exporter's domestic market.

02

Step 2. Following are the advantages and disadvantages of dumping.

a) Advantages:-

* Increase in market share and revenue.

* Availability of cheaper products.

b) Disadvantages:-

* Drain of resources.

* Creation of monopoly.

* Disruption of local industries.

03

Step 3. General prohibition of dumping often work better in theory than in practice.

Because:-

a) Anti-dumping laws are problematic because of the difficulties in determining what the right price should be. Thus, create difficulties to implement the anti-dumping laws.

b) The tendency for political motives to corrupt the process.

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