The Lerner index shows monopoly power as the markup of _____,as a percentage of the product's price.
A)price over average cost
B)price over marginal cost
C)profits over price
D)total revenue over price

Question

Quizplus · Accepted Answer

The Lerner index is calculated as the difference between price and marginal cost divided by price. Therefore, the correct answer is price over marginal cost. This index measures a firm's degree of market power, with a higher index indicating a greater ability to set prices above marginal cost.

The Lerner Index Shows Monopoly Power as the Markup of _____,As