Figure illustrates the practice of international dumping by British Toys, Inc. (BTI). Figure (a) shows the domestic demand and marginal revenue schedules faced by BTI in the United Kingdom (UK), and Figure (b) shows the demand and marginal revenue schedules faced by BTI in Canada. Figure (c) shows the combined demand and marginal revenue schedules for the two markets, as well as BTI’s average total cost and marginal cost schedules.

a. In the absence of international dumping, BTI would charge a uniform price to U.K. and Canadian customers (ignoring transportation costs). Determine the firm’s profit maximizing output and price, as well as total profit. How much profit accrues to BTI on its U.K. sales and on its Canadian sales?

b. Suppose now that BTI engages in international dumping. Determine the price that BTI charges its U.K. buyers and the profits that accrue on U.K. sales. Also determine the price that BTI charges its Canadian buyers and the profits that accrue on Canadian sales. Does the practice of international dumping yield higher profits than the uniform pricing strategy? If so, by howmuch?

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INTERNATIONAL DUMPING SCHEDULES (a) United Kingdom 12 10 (b) Canada (c) Total Market 12 12 10 10 CATC a 4 a 4 2 2 2 4 6 8 10 14 16 Quantity of Toys Quantity of Toys Quantity of Toys