Dumping occurs when a foreign firm sells its exports at a lower price than its cost of production. You might be wondering why a firm would ever want to sell any of its output at a price below the cost of production.

Wouldn’t such a firm be better off either selling nothing or, if it could do so, raising its price to at least cover its costs? Two possible reasons why a firm might sell at a price below cost and therefore engage in dumping are Predatory pricing Subsidy