Economics - Profit/Monopoly?

Question

Assume there are only two producers of tennis rackets: Wilson and Prince. The market demand for tennis rackets is depicted by the algebraic formula P = 100 - Q, where P stands for price and Q stands for quantity of rackets. If the market were monopolized, the resulting formula for the monopolist's marginal revenue would be MR = 100 - 2Q, where MR stands for marginal revenue. Assume that both producers face a constant marginal cost of $40 and that there are no fixed costs.

3.5. True or False: The collusive agreement in which Wilson and Prince split production evenly and maximize joint profits will be easy to sustain because each firm has an incentive to produce the agreed output, regardless of what the other firm does.

Answer 1

False - firms involved in collusive agreements tend cheat to get relative higher profits by the account of other firms.