Question: Hi. Could you please explain step by step how to find the solution for this problem? Acme and Tartine are identical bakeries and are the

Hi. Could you please explain step by step how to find the solution for this problem?

Hi. Could you please explain step by step how to find the

Acme and Tartine are identical bakeries and are the only suppliers of baguettes in San Francisco. They have agreed to form a cartel: they jointly sell @ = 16 baguettes and charge p = 9. Each bakery shall produce half of the joint quantity. Acme is tempted to cheat on the cartel agreement and increase its own production by 2 units. Acme knows that if they cheat, there is a 50% chance Tartine will catch them and force them to pay a fine of F that is taken out from their profits. If the market demand curve is Q = 34 - 2P and the marginal cost of producing baguettes is constant and equal to 1 (assume there are no fixed costs), how big does F have to be to make Acme indifferent between cheating and not? F =

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