The exit of competitors means existing firms see their demand
and marginal revenue curves shifting upward. 
The exit of competitors means existing firms see their demand
and marginal revenue curves shifting upward.
We show the shift to D3 as a shift to a less elastic demand curve. In a shrinking industry there are fewer substitutes
for remaining firms, so everyone's demand becomes a bit more inelastic. The new long run equilibrium price, P3, is a bit higher than the original price P* and the new equilibrium quantity, Q3, is slightly lower than the original Q*.
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