Pre-mixed concrete is an important input for the construction industry. Concrete cannot be stored or transported over long distances as it begins to set after only a few hours. For this reason, only the three local firmsAggregate Inc., Big Industries and ConCorpare in a position to compete in the market. Moreover, the capital and regulatory requirements for constructing a new concrete plant are substantial, creating an effective barrier to entry. Pre-mixed concrete is regarded as a homogeneous good by the construction industry. Inverse demand in the market has been estimated to be,

P= 600Q 50,

where P represents the price of a cubic metre of concrete in dollars, and Q is the total number of cubic metres of concrete supplied into the market on a given day. At present the three firms appear have identical production costs, with each firm facing fixed costs of $400,000 per day and a marginal cost of $180 per cubic metre. Big Industries and ConCorp estimate that the proposed merger would reduce their marginal cost to $120 per cubic metre, while the merged firm is expected to face fixed costs of $1,000,000 per day.

(market in the absence of a merger)

(Assume existing equilibrium in the market.)

(-The profit of any typical firm is negative $399.78 (rounded up). Each of the firm produces 2.1 units.

-The best-response function is shown as QA= (420 - 50X)/100)

3) Find the equilibrium quantity for the typical firm, the equilibrium market quantity,

and the equilibrium market price.

4) Find the equilibrium profit for the typical firm and the equilibrium consumer surplus.