Just a few numbers to put in perspective:
* Iceland's population (as of 2013) was 323,000.
* As of 2015, the US had 58 cities whose population was over 320,000. Combined, these cities account for about 16% of the total population of the US.
Though, even that's a bit misleading, because city populations aren't actually as meaningful as metropolitan populations (since city boundaries are arbitrary, and traveling between a city and the adjacent suburbs is easy). Since Iceland is an island, it's more elucidating to compare it to metropolitan areas:
* The US has 155 metropolitan areas whose population is larger than the 320,000. Together, these cities account for 74.7% of the US population. So, three-quarters of people living in the United States live in a metropolitan area whose population is greater than that of the entire country of Iceland.
I also somewhat disagree with the notion that systems working in smaller countries cannot work in larger or more diverse countries (esp. regarding free education the US). It may be really, really damn hard, but such is the price of advancement of society.