Purchase Solution

Lerner Index and Market power

Not what you're looking for?

Ask Custom Question

What is a Lerner index?

If a manufacturing company has a rather unique product that sells for $15 per unit, and the marginal cost is $7.50 what is the Lerner index?

Does this index indicate market power?

Please step me through this.

Purchase this Solution
Solution Summary

This explains the relationship between Lerner Index and Market power.

Solution Preview

Definition of The Lerner Index: The Lerner Index is a measure of the profitability of a firm that sells a good: (price - marginal cost) / price.

One estimate, ...

Purchase this Solution
Free BrainMass Quizzes
Basics of Economics

Quiz will help you to review some basics of microeconomics and macroeconomics which are often not understood.

Economic Issues and Concepts

This quiz provides a review of the basic microeconomic concepts. Students can test their understanding of major economic issues.

Elementary Microeconomics

This quiz reviews the basic concept of supply and demand analysis.

Economics, Basic Concepts, Demand-Supply-Equilibrium

The quiz tests the basic concepts of demand, supply, and equilibrium in a free market.

Pricing Strategies

Discussion about various pricing techniques of profit-seeking firms.

View More Free Quizzes
Related BrainMass Solutions

  • The Lerner Index

    As the ratio increases from zero to one, it is more likely that the firm possesses significant market power. At first blush, the Lerner Index seems to offer a quick and easy insight into a firm's market power.

  • Lerner-Index, price elasticity, profit

    What is the price elasticity at the monopoly price and output? 2) What is the Lerner-Index of Market Power for this monopoly at this price and output? 3) What would the competitive market price and output be for this example?

  • Lerner's Index

    So the firm has a lot of market power. The Lerner's Index does make sense in this situation. The merger formed one of the largest pharmaceutical company which has a lot of monopoly power.

  • Mergers and industry consolidation

    Lerner index P-MC /P 30 - 28 / 30 = 2/30 = 0.1 This is a small Lerner index and indicates lack of market power. 8.

  • Pricing with Market Power

    The Lerner Index is measured by the equation l = (price - marginal cost) / price. The learner index can be as high as 1 and can be as low as zero. This index gives us the monopoly's market power.

  • Amazon.com

    The Rothschild index & the Lerner index will particularly measure the monopoly power of the industry. References: 1) Bakos, Yannis. "The Emerging Landscape for Retail E-Commerce."

  • Pricing with marketing power

    The Lerner Index mentioned by the question gives the monopoly power in the market. The power ranges from zero to one. The power is zero when the elasticity of demand is maximum and the power is one when the price elasticity of demand is zero.

  • Market Power and Monopoly

    A firm has $1.5 million in sales, a Lerner index of 0.57, and a marginal cost of $50, and competes against 800 other firms in its relevant market. a. What price does this firm charge its customers? SHOW all work b.

  • Monoplies

    One method of measuring the extent of a firm's market power is: a. the Lerner index. b. price elasticity of demand for the firm's product.

View More Related Solutions