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5. [30 marks] Consider the market for electricity in two different provinces. The demand in each of the provinces is given by: D1 = 8

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5. [30 marks] Consider the market for electricity in two different provinces. The demand in each of the provinces is given by: D1 = 8 - 2p and D2 = 10 - P. respectively. Initially, each province has a monopoly providing electricity with a constant marginal cost c = 2. A proposed policy would allow both monopolies to merge into a single monopoly that would operate on both provinces at the same time. The merger would have no effect on the cost function. The merged monopoly would have to charge the same price in both provinces. (a) Find the price and total consumption of electricity in province 1 before the merger. (b) Find the price and total consumption of electricity in province 2 before the merger. (c) Find the price and total consumption of electricity in each province after the merger. (d) What would be the effect of the merger on profits? (e) What would be effect of the policy on the consumer surplus in each province? (f) Comparing the situations before and after the merger. Which of the two, if any, is a Pareto improvement relative to the other

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