The market inverse demand curve is P = 60 - Q. The three firms in this industry are acting like a monopolist, evenly splitting output. The marginal cost is $6. Suppose one of the firms produces an additional unit of output. The cheating firm's profit will change from:

Question

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The initial total output is Q = 18 (since each firm produces 6 units, evenly splitting the output). The price is P = 60 - 18 = $42. Each firm earns a profit of (42 - 6) * 6 = $216. If one firm produces an additional unit, Q = 19, P = 60 - 19 = $41. The cheating firm's profit becomes (41 - 6) * 7 = $245. The profit changes from $243 to $260.

The Market Inverse Demand Curve Is P = 60 -