The inverse market demand curve is P = 170 – 4Q. Two firms inthis market are evenly splitting the output. Each firm produces theproduct at a constant marginal cost of $10. Which of the followingstatements is TRUE? I. If one firm produces 2 more units of output,its profits will rise to $864. II. If neither firm cheats, eachfirm will earn a profit of $800. III. If one firm produces 3 moreunits of output, the other firm's profits will fall to $680.
