A Chinese Semi-Conductor Firm has a capacity of 100,000 units per week. The firm

Question

A Chinese Semi-Conductor Firm has a capacity of 100,000 units per week. The firm sells 70,000 units in China, at a price of $20 per unit. The Fixed Cost of the firm is $650,000, and the variable cost is $2. The firm decides to sell the product at $9 per unit in the US. In your opinion, is the Chinese firm dumping in the US market or not? Why? Show your work. A Chinese Semi-Conductor Firm has a capacity of 100,000 units per week. The firm sells 70,000 units in China, at a price of $20 per unit. The Fixed Cost of the firm is $650,000, and the variable cost is $2. The firm decides to sell the product at $9 per unit in the US. In your opinion, is the Chinese firm dumping in the US market or not? Why? Show your work.

Explanation / Answer

Profit from selling 70000 units in Chinese market

Profit= 70000*20 - 650000 - 70000*2= 610000.

Now the firm can dump it's products in US as 100000-70000= 30000 capacity is still left. Now if it does, profit from dumping is-

9*30000 - 30000*2= 210000

Here we have not considered fixed cost because it is calculated once.

So firm earns 210000 from dumping. So it does choose to dump.

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