Suppose that the market demand for concrete is given by the equation P = 300 – 1/3 Q, where Q is the total quantity, in yards, supplied by three existing firms. Assume that the three firms are identical, and that the marginal and average cost of producing a cubic yard of concrete is exactly $30.
a. Derive reaction curves for Firm 1, Firm 2, and Firm 3.
b. By repeated substitution, find the output of each firm.
c. Solve for the market price, firm profits, and industry profits.
d. How would the price, quantity, and industry profit change if one of the firms were to exit the industry?