Pe=$18,000 Qe=6 million cars, Qs=6 million cars, Qd=6 million carsb. Suppose this country decides to open up to free international trade. What will happen to thedomestic price of cars, domestic car production (Qs), and domestic car consumption (Qd)? Will thiscountry become a car importer or a car exporter? How many cars will it import or export? What will02468101214161801234567891011121314Quantity of cars (in millions)Domestic DemandQe=PS202224262830Price (thousands ofU.S. dollars)Domestic SupplyCS
3happen to economic surplus produced and earned in this country (TS) and how will it be dividedbetween buyers (CS) and sellers (PS)?c. What was the benefit this country got from opening up to free international trade? In other words,what is the dollar value of this gain from trade that comes about because of the better world‐wideallocation of resources?Gain from trade = $105,000,000,000‐$90,000,000,000 = $15,000,000,00002468101214161820222426283001234567891011121314Price (thousands of U.S. dollars)Domestic DemandDomestic SupplyWorld PriceexportsQd=Qs=P=PSCS
42. Gains from TradeSuppose the following table provides the production possibilities for the only two countries in the world.These two countries can produce only these two goods. Assume resources are identical in production.Use this information to show how trade benefits the world and the two individual countries. Alsoassume the countries are able to produce with no idle resources and no production mistakes.Computer gamesAnimated moviesSouth Korea400300Ukraine500200a. Illustrate the production possibilities for these two countries by drawing their PPF, with animatedmovies measured on the horizontal axis and computer games measured on the vertical axis.