Certified Anti-Money Laundering Specialist Certification (CAMS) Practice Exam

What is NOT a reason for firms to export goods at lower prices?

1. To dispose of excess inventory

2. To create new overseas markets

3. To recover costs

4. To sustain market control in every region

The correct answer is: To sustain market control in every region

The reason firms do not export goods at lower prices to sustain market control in every region lies in the fundamental objectives behind pricing strategies in international trade. When firms lower their prices for exports, they are typically motivated by the need to address specific operational challenges such as excess inventory, market penetration, or recovering costs. Exporting at lower prices can help dispose of excess inventory by allowing firms to clear out stock that they otherwise cannot sell in their domestic markets. Additionally, creating new overseas markets is a strategic move for companies looking to expand their customer base. It can stimulate demand and introduce their products to consumers who may not have previously considered them. Companies may also lower prices to cover costs, particularly when entering a new market where they need to establish their brand and attract customers. However, sustaining market control implies maintaining a consistent pricing strategy across different regions without significant price variations. Lowering prices selectively can undermine this objective, as it can create perceptions of a brand being less valuable or diminish profit margins in a way that is unsustainable in the long term. Hence, sustaining market control does not align with the rationale for exporting at reduced prices, making it the correct choice in this context.