How is an oligopoly market structure different from the other three market struc
ID: 1151998 • Letter: H
Question
How is an oligopoly market structure different from the other three market structures studied in Chs. 8-9?
What’s the relationship between MR and P for a firm with market power? Why?
What is a firm’s mark-up?
What does the Lerner Index measure and how is it calculated?
How is an oligopoly market structure different from the other three market structures studied in Chs. 8-9?
What’s the relationship between MR and P for a firm with market power? Why?
What is a firm’s mark-up?
What does the Lerner Index measure and how is it calculated?
Explanation / Answer
1. Oligopoly
Perfect competition is a market structure
Monopolistic competition refers to a market structure, where
Monopoly
3. Mark up is the price which a firm adds to the cost price of a product. The value so added to the cost price of a product is called the mark-up and generally equals retail price.
4. The Lerner index defines a market power of a firm. It value ranges from 1(high) to 0 (low). The higher Lerner index denotes greater market power. The Lerner index is calculated as (P - MC) / P, where P = market price set by the firm and MC = firm's marginal cost.