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Giant Electricity is the only electricity provider in the City. An economist estimates that she is facing a demand with an elasticity of -2.5.

Giant Electricity is the only electricity provider in the City. An economist estimates that she is facing a demand with an elasticity of -2.5. She operates with a cost function of C = 30 + 18Q. a. b. Find the Lerner Index facing Giant Electricity. Using this to find the price she should charge. (3 marks) Explain TWO reasons why a monopoly like Giant Electricity creates deadweight loss. (4 marks)

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