Assume the Lerner index for one firm is given by 0 7, and the marginal cost is $
ID: 1192929 • Letter: A
Question
Assume the Lerner index for one firm is given by 0 7, and the marginal cost is $40. What price does this firm charge its customers? By what factor does this firm mark up its price over marginal cost? Do you think that the market within which this firm operates is competitive or does the firm enjoy market power? Consider the Dansby-Willig performance index for the following industries: Determine in which industry will an increase in output cause an increase in social welfare, and determine which industry has the best performance? Assume there are two firms in two different industries. The marginal cost of the first firm is $25. and its price is S30. The marginal cost of the second firm is $24. and its price is $30. Which one has a higher markup over marginal cost?Explanation / Answer
Q. No. 5) The firm charge 5.71 to its customer. By 7.1 factor the firm mark its price over MC. The market is competitive.
Q No. 6) Computer is an industry where an increase in output will increase in soical welfare. Computer industry has the best performance.
Q. No. 7) The second firm.