QUESTION-3: [5 Marks]. Supercar industry produces cars. The average cost (AC) is given as AC = (am/S) + c and the price (P) is given as P : c + (NEW); where n denotes the number of rms in the industry, F C: xed cost, S: market size, 0: marginal cost, and b: a constant. The numerical values are given as F C = 800,000,000; c = 8,000 and b = 1/40,000. The industry output before trade is 800000 cars in the home market and 1200000 cars in the foreign market. Page 6 of 16 3310AFE Open Economy Macroeconomics (a) Find the number of rms in the industry, the output per rm, and the price per car in the twocountry market before trade. [2 Marks] (b) Now suppose the two countries (home country and foreign country) in part (a) above were to integrate their car market with a third country, a fourth country, and a fth country, which have an annual market for 5 million, 3 million and 2 million cars, respectively. Find the number of rms in the industry, the output per rm, and the price per car in the new integrated market after trade. Compare and discuss the price before and after trade. [3 Marks] [Note: You could either type in your answer or clearly write it on a piece of paper and then take a scan (photo) and paste it in this document]