The figure shows the market for helicopters in the United States, where D is the domestic demand curve and S is the domestic supply curve. The United States trades helicopters with the rest of the world at a price of $36 million per helicopter.
-In the figure above, with international trade helicopters per year are produced in the United States.

Question

Quizplus · Accepted Answer

With international trade, the price of helicopters is $36 million, which is higher than the domestic equilibrium price of $30 million. At this price, domestic producers are willing to supply 480 helicopters (point E) while domestic consumers demand only 240 helicopters (point F). However, with international trade, the US can export helicopters to the rest of the world. At a price of $36 million per helicopter, the quantity supplied domestically increases to 720 helicopters (point G), which is greater than domestic demand. Therefore, the US will export the difference between domestic supply and demand, which is equal to 480 helicopters. Thus, the total number of helicopters produced in the US with international trade is 720, which is higher than the domestic equilibrium level of 480.

The Figure Shows the Market for Helicopters in the United