China Slaps Anti-Dumping Duties on Plastics from the U.S. and Other Countries

Answer the following questions to check your understanding of the story.

What does it mean to say that foreign firms are dumping plastic products in China?

Dumping means that the plastic products are being sold in China _____________.

a) at a higher price than the cost of production in the foreign countries

b) at a lower price than the cost of production in China

c) at a lower price than the cost of production in the foreign countries

d) are inferior to the plastic products that the firms are selling in their own countries

Wrong! - What is dumping? Does dumping occur when foreign firms sell their exports at a higher price than their cost of production? Does it concern the quality of exports? Does it depend on the cost of production in the importing country?

That's Right! - Dumping occurs when a foreign firm sells its exports at a lower price than its cost of production.

Is it easy for China to detect the dumping of plastic products from foreign producers?

a) Yes, because it is easy to determine a foreign firm’s costs.

b) No, because it is difficult to determine a foreign firm’s costs.

c) Yes, because the price of foreign-produced plastic products is less than the price of Chinese-produced plastic products.

d) No, because the quality of foreign-produced and Chinese-produced plastic products are similar.

Wrong! - Is it easy for China to determine a foreign firm’s cost? Isn’t a firm’s costs private information? Is product quality a factor in detecting dumping? Is a comparison of foreign and domestic plastic prices a factor in detecting dumping?

Good Job! - It not easy for China to detect the dumping of plastic products because a foreign firm’s cost of production is private information and difficult to determine.

Why is China imposing anti-dumping duties on plastic products?

China is imposing anti-dumping duties on plastic products ____________.

a) to penalize domestic firms

b) to protect its consumers from paying higher prices

c) to increase Chinese production and increase employment in the plastic market

d) to increase its comparative advantage in plastic production

Wrong! - Does comparative advantage change by imposing anti-dumping duties? Are anti-dumping duties imposed to protect consumers? Does the price of plastic products fall? Do anti-dumping duties penalize domestic firms?

Correct! - Anti-dumping duties are a type of tariff. The price in China rises to the world price plus tariff. Plastic production and employment in the plastic market increase in China.

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