The Automobile Market, with No Trade and with Free Trade
(Figure 6.4)

With no trade, the size of the market is limited to the domestic market, and the unit cost curve is UC1. The market equilibrium is at point A, with 15 different models produced and offered for sale in the national market, each at a price of 1.9 million yen. When international trade in this type of product becomes possible, the size of the market increases. As the size of the market increases, the unit cost curve shifts down (to the right). Press "Show UC2" to show the free-trade unit cost curve on the graph. With free trade, the equilibrium shifts to point B. The price of a car is competed down to 1.5 million yen, and 26 different models will be offered for sale to consumers. For a single country some of these 26 different models will be produced domestically, and some will be imported.
Press "Continue" when you are ready to move on. The "Reset" button will clear the graph.