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Diano4ka-milaya [45]
3 years ago
12

I will give brainiest to the answer that is right

Business
1 answer:
Mariulka [41]3 years ago
4 0

Answer:

D. 14.99%

Explanation:

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A firm has a marginal cost of $20 and charges a price of $40. The Lerner index for this firm is:________.
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Answer:

The correct answer is:

0.50 (B)

Explanation:

The Lerner index is used by monopolists to measure market/monopolist power, and it is defined as the percent markup of price over marginal cost.

It is given by the formula:

L = \frac{P - MC}{P}\\where:\\L = Lerner\ index\\P = price = \$40\\MC = marginal\ cost = \$20\\\\L = \frac{40\ -\ 20}{40} \\L = \frac{20}{40}\\ L = 0.5

Note: in a perfectly competitive market, L = 0, which makes Price = Marginal cost in the equation above. But in a competitive market, it is always the case that L ≥ 0

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