Question 1

Pricing products only minimally above cost does NOT constitute dumping.

Accepted Answer

The United States Department of Commerce considers that dumping takes place even if products are priced only minimally above cost, or at prices below those charged in the producing country.

Question 2

A foreign company that enjoys high prices and high profits at home as a result of trade barriers against imports can use those profits to sell at much lower prices in foreign markets in order to build market share at the expense of competitors with open home markets. This is known as monopoly pricing.

Accepted Answer

The example above is one of dumping, which involves a foreign company that enjoys high prices and high profits at home as a result of trade barriers against imports. The company uses those profits to sell at much lower prices in foreign markets in order to build market share and suppress the profitability of competitors with open home markets.

Question 3

Price discrimination by the manufacturer has been identified as a main cause of parallel importing.

Accepted Answer

Differential pricing (price discrimination) by the manufacturer is a main cause of parallel imports or gray markets.

Question 4

The European Commission, in charge of anti-dumping regulation in the European Union, requires a vote of the Council of Ministers for action against dumping activity and other unfair trade practices.

Accepted Answer

In the U.S., the Department of Commerce examines dumping accusations. In Europe, the European Commission examines dumping cases. It requires a vote of the Council of Ministers for action against dumping activity and other unfair trade practices.

Question 5

Companies can and often do price themselves out of the market in certain countries.

Accepted Answer

Companies can and often do price themselves out of the market in certain countries. This is especially the case if they do not shift production to a low labor/cost, low-tax country.

Question 6

Even if price discrimination is found to occur, the World Trade Organization condemns responding through anti-dumping duties as being noncompetitive and contrary to world trade.

Accepted Answer

As established by the World Trade Organization, after determining that price discrimination did indeed occur and that a particular local industry was injured by the dumping activity, governments are entitled to impose anti-dumping duties on merchandise.

Question 7

According to the World Trade Organization, dumping should be condemned if it threatens to cause injury to an established industry in a particular market and/or if it delays the establishment of a viable domestic industry.

Accepted Answer

According to the World Trade Organization, dumping should be condemned if it threatens to cause injury to an established industry in a particular market and/or if it delays the establishment of a viable domestic industry.

Question 8

The United States Department of State is the government branch responsible for determining whether products are dumped on the U.S. market.

Accepted Answer

The United States Department of Commerce is the government branch responsible for determining whether products are dumped on the U.S. market.

Question 9

In Romania and Turkey, it is a good idea to price product using even pricing.

Accepted Answer

In countries like Egypt and Romania retailers keep the change. If a manufacturer charges an even price then there is no change to be kept. For this reason, the retailer's profits are affected and it is unlikely to promote the product.

Question 10

The Export-Import bank, the government branch responsible for determining whether products are dumped on the U.S. market, considers that dumping takes place if products are priced only minimally above cost, or at prices below those charged in the producing country.

Accepted Answer

The United States Department of Commerce is the government branch responsible for determining whether products are dumped on the U.S. market.

Question 11

The World Trade Organization has created a model that determines product costs in state-owned and directed economies that greatly simplifies the once complex process of diagnosing dumping activity.

Accepted Answer

There is a strong disagreement on exactly how to determine product costs in state-owned or directed economy environments. The U.S. Department of Commerce is attempting to address this unknown by making reference to tangible measures, such as product price in the product's home country or in other markets.

Question 12

The location of production facilities determines the extent to which a company can control costs and price the products competitively.

Accepted Answer

The location of production facilities determines the extent to which a company can control costs and price the products competitively. Multinationals can usually afford to shift production in order to take advantage of lower costs and exchange rates.

Question 13

Governments regulations and restrictions exist with regard to many pricing decisions, ranging from dumping to setting limits on wholesalers' gross margins and on the product's retail price.

Accepted Answer

Regulations and restrictions exist with regard to many pricing decisions, ranging from dumping to setting limits on wholesalers' gross margins and on the product's retail price.

Question 14

Thanks to a more strict enforcement of anti-dumping regulations, companies are seldom affected by dumping now.

Accepted Answer

In spite of a more strict enforcement, companies continue to be affected by pricing actions of importers taking advantage of loopholes in the anti-dumping legislation. In order to avoid price discrimination charges, the importers modify their products slightly so as not to permit them to be directly compared with products sold in other countries at higher prices.

Question 15

A firm charging the same price to all channel members encourages competition from unauthorized channels.

Accepted Answer

A firm engaging in a differential pricing strategy could be vulnerable to competition from unauthorized channels. In fact, differential pricing by the manufacturer has been identified as a main cause of parallel importing.

Question 16

Governments use numerous strategies in their attempts to restrict the repatriation of profits by multinationals. One way that companies can bypass such restrictions is through the use of countervailing pricing.

Accepted Answer

Countervailing duties are imposed on firms when they receive subsidies from their home-country. Transfer pricing is a way that companies try to repatriate profits.

Question 17

An international company must react to changes in the competitive environment, in the political and legal environment, and in the economic and financial environment, by changing its pricing strategies accordingly.

Accepted Answer

Pricing decisions are affected by all the external elements in a company's international environment. An international company must react effectively to changes in the competitive environment, in the political and legal environment, and in the economic and financial environment. This appears in the "Environment-Related Challenges and Pricing Decisions" section (16-2).

Question 18

It is difficult for financial officers to keep track of product costs in international marketing.

Accepted Answer

Product components often are manufactured in different countries. Often, the final products are assembled in a particular country-which is frequently not the company's home country-and then sold all over the world. It is consequently difficult for financial officers to keep track of product costs.

Question 19

Governments regulate prices charged by multinational firms.

Accepted Answer

Governments regulate prices charged by multinational firms.

Question 20

In countries like Egypt and Romania a company using even pricing will be at a disadvantage even if it is pricing below competitors' prices.

Accepted Answer

In countries like Egypt and Romania retailers keep the change. If a manufacturer charges an even price then there is no change to be kept. For this reason, the retailer's profits are affected and it is unlikely to promote the product.

Quiz 16: International Pricing Strategy

Pricing products only minimally above cost does NOT constitute dumping.

Price discrimination by the manufacturer has been identified as a main cause of parallel importing.

The European Commission, in charge of anti-dumping regulation in the European Union, requires a vote of the Council of Ministers for action against dumping activity and other unfair trade practices.

Companies can and often do price themselves out of the market in certain countries.

Even if price discrimination is found to occur, the World Trade Organization condemns responding through anti-dumping duties as being noncompetitive and contrary to world trade.

According to the World Trade Organization, dumping should be condemned if it threatens to cause injury to an established industry in a particular market and/or if it delays the establishment of a viable domestic industry.

The United States Department of State is the government branch responsible for determining whether products are dumped on the U.S. market.

In Romania and Turkey, it is a good idea to price product using even pricing.

The Export-Import bank, the government branch responsible for determining whether products are dumped on the U.S. market, considers that dumping takes place if products are priced only minimally above cost, or at prices below those charged in the producing country.

The World Trade Organization has created a model that determines product costs in state-owned and directed economies that greatly simplifies the once complex process of diagnosing dumping activity.

The location of production facilities determines the extent to which a company can control costs and price the products competitively.

Governments regulations and restrictions exist with regard to many pricing decisions, ranging from dumping to setting limits on wholesalers' gross margins and on the product's retail price.

Thanks to a more strict enforcement of anti-dumping regulations, companies are seldom affected by dumping now.

A firm charging the same price to all channel members encourages competition from unauthorized channels.

Governments use numerous strategies in their attempts to restrict the repatriation of profits by multinationals. One way that companies can bypass such restrictions is through the use of countervailing pricing.

An international company must react to changes in the competitive environment, in the political and legal environment, and in the economic and financial environment, by changing its pricing strategies accordingly.

It is difficult for financial officers to keep track of product costs in international marketing.

Governments regulate prices charged by multinational firms.

In countries like Egypt and Romania a company using even pricing will be at a disadvantage even if it is pricing below competitors' prices.