A situation in which a commodity is sold abroad below its cost of production in the home country is known as?

Step 1: Analyze the question The question describes a commodity being sold in a foreign market at a price below its cost of production in the home country. We need the term for this practice.

Step 2: Explain the concept Dumping is the practice of exporting goods to another country at a price lower than their cost of production, or lower than the price in the home market. Producers or governments do this to:

• Capture foreign markets
• Eliminate competitors abroad
• Get rid of surplus goods

Dumping is often treated as an unfair trade practice, and many countries impose anti-dumping duties to protect local industries.

Step 3: Check each option

• A. Dumping: Matches the description exactly. ✔
• B. Counter trade: This is an exchange of goods for goods, or a mix of goods and money, instead of payment in cash alone (a form of barter). It has nothing to do with selling below cost.
• C. Bilateral trade: Trade between two countries. It says nothing about pricing below cost.
• D. Trade liberalization: The removal or reduction of trade barriers such as tariffs and quotas. It is a policy, not a pricing practice.

Step 4: Answer The correct option is A. dumping.

Exam tip: Think of "dumping" as "dumping rubbish": the seller gets rid of goods cheaply, even at a loss, in another country's market. Whenever you see "sold abroad below cost or below home price," think dumping.