Figure 9.1 looks at a case where the world price is below the domestic no-trade price. Let€™s look at the case where the world price is above the domestic no-trade price. We€™ll work with the market for airplanes shown in the following figure:

a. In the figure, use the Quantity axis to label QsFree trade and QdFree trade. This is somewhat similar to Figure 9.1.
b. What would you call the gap between QsFree trade and QdFree trade?
c. Also following Figure 9.1, label €œDomestic consumption€ and €œDomestic production.€
d. Will domestic airplane buyers€”airlines and delivery companies like FedEx€”have to pay a higher or a lower price under free trade compared with the no-trade alternative? Will domestic airplane buyers purchase a higher or a lower quantity of planes if there€™s free trade in planes?
e. Based on your answer to part d, would you expect domestic airplane demanders to support free trade in planes or oppose it?

Transcribed Image Text:

Price per plane (in millions of dollars) Domestic supply of planes World supply World price $200 150トー Domestic demand for planes Quantity of airplanes