Questions
ECON1056 Quiz 4: Monopoly
Short answer
A monopolist sells 2000 units of its product at a price of $50 per unit. The monopolist's marginal cost is $39, and its fixed cost is $8. Calculate the Lerner index of market power for the firm. (Provide your answer to 2 decimal places.)
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Step-by-Step Analysis
The Lerner index measures market power as the relative markup of price over marginal cost.
First, recall the formula: ......Login to view full explanationLog in for full answers
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Similar Questions
Comparing your answers to the previous two questions, at a price of $8 Salt City Donut’s markup is [ Select ] larger smaller than its inverse elasticity, meaning that it should [ Select ] raise lower its price.
Salt City Donuts is a local donut shop selling artisanal donuts such as a maple bacon donut with real bacon on top, a stuffed peaches and cream variety, and a full breakfast donut featuring egg and sausage on top. Salt City Donuts has marginal cost of $2 per donut. The donut shop knows that the price elasticity of demand for their donuts is -4 when they are charging a price of $8. The firm’s markup is:
When price elasticity of demand = -4, the optimal markup on cost is:
If the price elasticity of demand for a firm' s product is -4, the firm's profit-maximising mark-up on price is:
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