A duopoly in which both firms have a Lerner index of monopoly power equal to 0 is probably a:
A) Sweezy oligopoly.
B) Cournot oligopoly.
C) Stackelberg oligopoly.
D) Bertrand oligopoly.

Question

Quizplus · Accepted Answer

A Lerner index of 0 means that firms are pricing at marginal cost, and in a Bertrand oligopoly, firms compete in price, setting a price equal to marginal cost until their respective capacity is exhausted. Therefore, both firms would price at marginal cost until the market is saturated, resulting in a situation where both firms earn zero economic profit.

A Duopoly in Which Both Firms Have a Lerner Index