Question 3 (15 marks = 10 + 5) Assume that the standard assumptions of the monopolistic competition model hold. Each firm faces a demand curve given by Q = S * [1/n - b* (P - Pav)] and cost given by C = cQ. That is, firms are symmetric. a) Algebraically derive, and intuitively explain, the equations for (i) CC curve which shows the relationship between n and average cost of each firm, (ii) PP curve which shows the relationship between price and n. b) Sketch, on the same diagram, with the number of firms, n, on the horizontal axis, the two relationships, PP and CC. Explain what happens when the country moves from Autarky to Free Trade.