Final answer:
The inclusion of CIF, VAT, and distributor markups in export pricing leads to higher final prices for consumers. These factors must be factored into pricing strategies by manufacturers to maintain competitiveness in international markets. Additionally, practices like dumping can disrupt market dynamics and impact pricing.
Step-by-step explanation:
A manufacturer attempting to set prices for its products in export markets must realize that CIF (Cost, Insurance, and Freight), VAT (Value-Added Tax), and distributor markups all lead to higher final prices for consumers. These additional costs must be considered when setting the export price to ensure competitiveness in the market. High tariffs and complex permit systems can also affect the competitiveness of exports by increasing costs and reducing market access, potentially leading to monopoly situations or reduced competition.
In the context of dumping, foreign firms sometimes set prices below their cost of production, leading to a loss in the short run. This might be due to an intention to drive out local competitors and later gain monopoly power, or it could be an effect of their strategic business practices, such as clearing excess inventory or entering a new market.