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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Budget surplus
What will be an ideal response?
Economics
The total quantity of goods and services demanded by households, firms, foreigners, and government at varying price levels is:
a. gross domestic product. b. aggregate demand. c. aggregate expenditure. d. total demand. e. total expenditure.
Economics