Ney Inc. and ARN Parts are the only two producers of bulldozer bucket teeth. The owners of the two firms conspire to charge a monopoly price, with each firm serving half the market. The market inverse demand curve is P: 1,000 * l\Q, where Q measures the daily number of sets of bulldozer bucket teeth and P is the price per set. The marginal cost of production for either firm is constant at $200, and fixed costs are zero.
a. What is each firm's profit?
b. Now suppose that Ney Inc. reneges on the cartel agreement and decides to produce an additional 10 sets of bucket teeth per day. What is each firm's new profit?