International trade can create a larger market. We can illustrate the effects of trade on prices, scale, and the variety of goods available with a specific numerical example. Imagine that automobiles are produced by a monopolistically competitive industry. The demand curve facing any given producer of automobiles is described by equation (8-5), with b=1/30,000 (this value has no particular significance; it was chosen to make the example come out neatly). Thus the demand facing any one producer is given by Q = S X [(1) - (1/30,000) x (P - P)]. where Q is the number of automobiles sold per firm, $ is the total number sold for the industry, n is the number of firms, P is the price that a firm charges, and P is the average price of other firms. We also assume that the cost function for producing automobiles is described by equation (8-3), with a fixed cost F = $750,000,000 and a marginal cost c = $5,000 per automobile (again. these values were chosen to give nice results). The total cost is C = 750,000,000 + (5,000 x Q). The average cost curve is therefore AC = (750,000,000/0) + 5,000. Now suppose there are two countries, Home and Foreign. Home has annual sales of 900,000 automobiles; Foreign has annual sales of 1.6 million. The two countries are assumed, for the moment, to have the same costs of production