The airfreight market is best modelled as Cournot competition. This is because competing firms must hire aircraft and establish distribution networks before offering airfreight services. Demand for airfreight services is, P = 42 0.1Q, where P represents the price of transporting a package, and Q is the total number of packages transported per year, measured in millions of packages. At present, AAS charges $30 a package and transports 120,000,000 packages per year. While the firm is inefficient, it manages to return an operating profit of $360,000,000 per year into government revenues. The competition authority expects that after implementing the market reforms, all firms in the market (including AAS) will be more efficient. Each firm in the market will be able to transport a package at a marginal cost of $6 per package and face fixed costs of $100,000,000 per year.

Total cost function = 100,000,000 + 6QA

Using the cost function, derive a profit function for the typical firm. Use X to represent the combined number of packages transported by all other firms (measured in millions of packages)