Assume the United States televison manufacturing industry accuses the Japanese television manufacturers of dumping. Why should consumers not necessarily be worried about this practice?

Question

What will be an ideal response?

Answer 1

Dumping is the practice of selling goods at prices that are not only below the costs of production of the firms selling them but may also be below the costs of production in the host country. The argument is that this would allow the offending firms to put the domestic producers out of business and then raise prices again. The trouble with this logic is that it assumes that the high prices will not attract new entry into the industry. This seems unlikely in highly competitive markets. Therefore consumers should not be alarmed if Japanese television manufacturers want to dump their TVs in the United States at prices below their costs or below the cost of production of U.S. manufacturers.