The Lerner Index for a firm operating in a perfectly competitive industry would be:

Question

Quizplus · Accepted Answer

The Lerner Index is calculated as (P-MC)/P, where P is the price and MC is the marginal cost. In a perfectly competitive industry, the firm is a price taker and cannot influence the market price. Therefore, the Lerner Index would be zero, as the firm has no market power to set the price above its marginal cost. The Lerner Index is calculated as (Price - Marginal Cost) / Price. In a perfectly competitive industry, the price is equal to the marginal cost, hence (Price - Marginal Cost) would be zero. Therefore, the Lerner Index for a firm operating in a perfectly competitive industry would be zero.

The Lerner Index for a Firm Operating in a Perfectly