Question

Explain how predatory pricing could be a motivation for dumping.

Short answer

Predatory pricing could be a motive for dumping so that once domestic firms are driven out of market, the intenraitonal seller could charge high prices and earn higher benefits.

Step-by-step solution

Step 1. Introduction 

Dumping refers to a situation where producers from a foreign country might sell their products in the domestic market of another country at a price lower than the market price to drive out domestic businesses from competition.

Step 2. Explanation

Predatory pricing refers to the practice where the price is set low to drive out competition from the market. This is done to achieve monopoly status by forcing out other businesses. Predatory pricing could be a motive for dumping so that once domestic firms are driven out of the market, the international seller could charge high prices and earn higher benefits.