PrepTest 138, Section 2, Question 2
"Dumping" is defined as selling a product in(34 more words not shown)
In order to evaluate the(8 more words not shown)
- A"production cost" in(26 more words not shown)
- Bthere is agreement(23 more words not shown)
- Cshrimp producers from(22 more words not shown)
- Dshrimp producers from(22 more words not shown)
- Eshrimp producers from(18 more words not shown)
Reading the argument
Whose production costs are we using?
At first, the argument looks like a straightforward application of the definition. Country F sells shrimp in Country G for less than it costs to produce shrimp in G. If dumping means selling below the importing country's production costs, that would fit.
But what if the definition refers to the exporting country's costs? We haven't been told what it costs Country F to produce its shrimp. F might produce shrimp cheaply, sell them for a profit, and still undercut the cost of producing shrimp in G. In that case, the comparison with G's costs wouldn't settle whether F is dumping.
What we’re looking for
The question asks what we need to determine to evaluate the argument. Before applying this definition, we need to know which country's production costs it uses. The argument could work under one reading and leave a crucial fact missing under the other.
Working the answers
- ACorrect
This asks exactly which costs the definition means. If it means production costs in G, the evidence gives us the relevant comparison: F's selling price in G is below those costs. If it means production costs in F, we need information the argument hasn't supplied. Resolving that ambiguity tells us whether the stated evidence establishes dumping.
- B
Whether dumping harms an economy is a different question from whether dumping is happening. Experts could agree that it is harmful, agree that it is harmless, or disagree. None of those outcomes tells us which production costs belong in the definition.
- C
A lower price abroad doesn't necessarily mean selling below production cost. Suppose shrimp cost F's producers $3 to produce, sell for $8 at home, and sell for $6 in G. The foreign price is lower, but it still exceeds F's production cost. Comparing the two selling prices doesn't resolve the cost question.
- D
We aren't forecasting whether these producers will survive. Going out of business would be a possible consequence to investigate, but it doesn't determine whether their current conduct meets the definition. The argument is about what they're doing, not what will eventually happen to them.
- E
The definition says less than production cost. It doesn't require considerably less. Once we know which cost to use, a price slightly below it and a price far below it both satisfy that part of the definition. Measuring the size of the gap doesn't resolve which country's costs matter.
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