QuestionJuly 12, 2025

A Lerner index of O suggests: monopolistic competition. oligopoly. perfect competition. monopoly.

A Lerner index of O suggests: monopolistic competition. oligopoly. perfect competition. monopoly.
A Lerner index of O suggests:
monopolistic competition.
oligopoly.
perfect competition.
monopoly.

Solution
4.3(201 votes)

Answer

perfect competition. Explanation 1. Define Lerner Index The Lerner Index is defined as L = \frac{P - MC}{P}, where P is the price and MC is the marginal cost. 2. Interpret Lerner Index of 0 A Lerner Index of 0 implies P = MC, indicating no market power and prices equal marginal costs. 3. Determine Market Structure In perfect competition, firms are price takers, leading to P = MC. Thus, a Lerner Index of 0 suggests perfect competition.

Explanation

1. Define Lerner Index<br /> The Lerner Index is defined as $L = \frac{P - MC}{P}$, where $P$ is the price and $MC$ is the marginal cost.<br /><br />2. Interpret Lerner Index of 0<br /> A Lerner Index of 0 implies $P = MC$, indicating no market power and prices equal marginal costs.<br /><br />3. Determine Market Structure<br /> In perfect competition, firms are price takers, leading to $P = MC$. Thus, a Lerner Index of 0 suggests perfect competition.
Click to rate:

Similar Questions