Holding all else constant, higher prices will

Question

Quizplus · Accepted Answer

The Lerner index is a measure of market power, and it is calculated as the difference between price and marginal cost divided by price. When prices increase, the numerator of the Lerner index increases, while the denominator remains constant, resulting in a higher Lerner index. This indicates an increase in market power, which is associated with the ability of firms to charge higher prices without losing customers.

Holding All Else Constant, Higher Prices Will