Answer question 4. HW 5 Mono antitative.pdf Acrobat Reader File EditView Window

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Answer question 4.

HW 5 Mono antitative.pdf Acrobat Reader File EditView Window Help Sign In Home Tools The Bank Panic of 1... HW 5 Monopoly M... HW 5 Monopoly Q… x 115% d. Calculate the Lerner Index of Monopoly power using Price Elasticity of Demand Export PDF ^ 4. (5) If there are 2 Monopoly firms operating in 2 different product markets and their Price and MC are as follows: Adobe Export PDF Convert PDF Files to Word or Excel Online Firm A: Price $10 and MC = $15 Firm B:Price $5 and MC $3 Select PDF File HW 5 Monopol...titative pd Which company according to you has more monopoly power? Show the calculations and explain how you derived your conclusion Convert to Microsoft Worddocx) v Document Language English (U.S) Change Convert Create PDF Store and share files in the Document Cloud Learn More 8:42 AM EEE] 4: 11/18/2017

Explanation / Answer

Lerner thinks that the larger the positive value of p – MC as a proportion of p, the larger would be the degree of monopoly power. Therefore, his formula for the degree of monopoly power is

Lerner’s Index of monopoly power = (p – MC)/p   

therefore, monopoly power of firm A = (10-15)/10= -0.5

Monopoly power for firm B = (5 - 3)/ 5= 0.4

so, according to learner's index Firm B has more monopoly power than Firm A

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