NES Business Studies 2025 – 400 Free Practice Questions to Pass the Exam

The correct answer is based on the established understanding of "dumping" in the context of international trade. A nation is considered to be engaging in illegal dumping when it sells products in foreign markets at a price that is lower than the cost of production. This practice often aims to gain a competitive advantage by undercutting local businesses in the importing country, which can lead to significant market distortions. Dumping can harm domestic industries in the importing countries, prompting them to seek legal remedies through trade agreements and international regulations.

In this scenario, selling goods above production costs would not constitute dumping, as it wouldn't result in harmful competitive pricing. Similarly, storing excess production for future sales does not reflect unfair pricing practices in foreign markets, nor does maintaining a balance of trade, which refers to the financial relationship between exports and imports.