Suppose that fixed costs for a firm in the truck manufacturing industry (start-up costs of factories, automation chain, etc.) are $1.5 billion, and that variable costs are $1,000 per finished truck. Suppose that the truck market is monopolistically competitive, and firms are identical. Suppose the market price is determined by the equation
Assume that there are three countries in the world: England, Scotland, and Wales, with the market size being 300 million, 200 million, and 100 million, respectively.
a. (5 marks) Calculate the equilibrium number of firms in the truck market in England in autarky.