New York State plans to convert two of her power (utility) firms into separate private (limited liability) companies that operate in two geographically distinct boroughs (markets). Suppose before privatization, the price of electricity was $0.13 per kilowatt-hour, the inverse demand function for electricity in each borough is P = 1.35 - 0.002Q, and costs of electricity supply by each electric firm is C (Q) = 120 + 0.13Q. Once privatized each firm will have an incentive to maximize profit in its market

( i.) Clearly show steps and determine the short-run profit-maximizing output and price of electricity by each firm, after privatization.

(ii.) Clearly show steps and determine the own-price elasticity of demand at the short-run profit-maximizing levels of output and price in (a) above

(.iii.) Carefully evaluate the economic rationality (sensibleness) of the estimated price elasticity of demand in (b) above.

(iv.) Clearly show steps and determine the change in profit/loss by each firm as a result of privatization (i.e., determine and compare profit/loss before and after privatization by each firm).(10 Points)