For profit-maximizing monopolies, explain why the boundaries on the Lerner Index are 0 and 1

What will be an ideal response?


The Lerner Index equals (p - MC)/p. Because marginal cost is greater than or equal to zero and the optimal price is greater than or equal to the marginal cost, then 0 ? p - MC ? p. So, the Lerner Index ranges from 0 to 1 for a profit-maximizing firm. As price gets higher, the Lerner Index approaches 1. As price gets lower, the index approaches zero.

Economics

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A) too tight. B) too easy. C) just about right. D) too tight from 1965 to about 1970 and too easy from about 1970 to 1979.

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Demand describes how much of something people:

A. are willing and able to buy at alternative prices under certain circumstances. B. want, but may not necessarily be able, to buy under certain circumstances. C. are willing and able to sell under certain circumstances. D. be able to buy, but might not want to buy under certain circumstances.

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Which of the following is included in the aggregate demand for goods and services?

a. consumption demand b. investment demand c. net exports d. All of the above are correct.

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An increase in the availability of an important major resource such as oil shifts the:

a) aggregate-supply curve to the left. b) aggregate-demand curve to the left. c) aggregate-supply curve to the right. d) aggregate-demand curve to the right.

Economics