Consider the market for automobiles in the United States. In the absence of trade, the equilibrium price of an average sedan is $20,000, and the equilibrium quantity is 100 million cars per year.
A. Illustrate this situation on a supply-demand graph with quantity of cars (in millions) on the x-axis and price (in thousands) on the y-axis. Mark the supply curve as the U.S. supply.
B. Suppose that the world price of an average sedan is $16,000. At this price, the domestic suppliers can supply 60 million cars, and the demand is 140 million cars. On the graph, illustrate the world supply curve, the domestic supply, the domestic demand, and the quantity of imports.
C. Suppose the United States imposes a 60 million unit quota on the import of cars. That is, the United States can import at most 60 million cars. Illustrate the impact of this quota on the equilibrium price and quantity of the cars.

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The Answer of Consider the market for automobiles in the United States. In the absence of trade, the equilibrium price of an average sedan is $20,000, and the equilibrium quantity is 100 million cars per year.
A. Illustrate this situation on a supply-demand graph with quantity of cars (in millions) on the x-axis and price (in thousands) on the y-axis. Mark the supply curve as the U.S. supply.
B. Suppose that the world price of an average sedan is $16,000. At this price, the domestic suppliers can supply 60 million cars, and the demand is 140 million cars. On the graph, illustrate the world supply curve, the domestic supply, the domestic demand, and the quantity of imports.
C. Suppose the United States imposes a 60 million unit quota on the import of cars. That is, the United States can import at most 60 million cars. Illustrate the impact of this quota on the equilibrium price and quantity of the cars.

Consider the Market for Automobiles in the United States