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Q.Two statements are given below. They are Assertion (A) and Reason (R). Read both the statements carefully and choose the correct option : Assertion (A) : Countries need to be cautious about dumped goods under free trade. Reason (R) : Dumping of goods can harm the domestic producers. Options : (A) (A) is true, but (R) is false. (B) (A) is false, but (R) is true. (C) Both (A) and (R) are true, but (R) is not the correct explanation of (A). (D) Both (A) and (R) are true and (R) is the correct explanation of (A).

CBSECBSE Class XII Board 2024MCQ· 1mImportance★★★★★
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Countries must guard against dumped goods in free trade because dumping directly threatens the survival of domestic producers by undercutting their prices artificially.

When nations open their borders to free trade, they unlock enormous benefits—access to cheaper imports, greater consumer choice, and the efficiency gains that come from specialization. Yet free trade also exposes domestic industries to practices that can distort competition rather than enhance it. One such practice is dumping, and it sits at the heart of why governments remain vigilant even as they liberalize.

Dumping occurs when a foreign producer sells goods in another country at a price below what it charges in its home market, or even below the cost of production. The motive is usually strategic: capture market share quickly, drive out local competitors, or offload surplus stock. On the surface, consumers in the importing country benefit from rock-bottom prices. But the damage unfolds beneath that surface.

Domestic producers face an impossible dilemma. They cannot match prices that are artificially suppressed—prices that do not reflect true costs or fair competition. Orders dry up, factories scale back, workers lose jobs. If the dumping persists, entire industries can collapse. Once the domestic competition is eliminated, the foreign firm may raise prices again, having secured a monopoly or dominant position. The short-term consumer gain evaporates, replaced by long-term dependence and higher costs.

Important

Dumping is not ordinary competition. It is predatory pricing on an international scale, using artificially low prices as a weapon to eliminate rivals rather than to compete on merit. …

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