Firms compete for sales and resources.
In symmetric equilibrium, the number of firms determines concentration and firm size. If the number of firms is exogenous, one can study the relationship between the number of firms and the rate of growth of the economy. This exercise gives a first intuition about the forces at work. Static economies of scale due to product and knowledge variety yield increasing returns to the number of firms. The number of firms, in addition, must be endogenous and determined jointly with the rate of growth by the zero-profit condition.