The Lerner Index is a measure of market power that focuses on:
A)the ratio of the price of a firm's product to the price elasticity of demand for the product.
B)the share of the market controlled by the X largest firms in the market.
C)the sum of the squares of the market share of each firm in an industry.
D)the difference between a firm's product price and its marginal costs of production.

Question

Quizplus · Accepted Answer

The Lerner Index is defined as the difference between a firm's price and its marginal cost, divided by the firm's price. It measures the extent to which a firm has market power to set prices above marginal cost, with higher values indicating greater market power. Options A, B, and C are measures of market concentration, not market power.

The Lerner Index Is a Measure of Market Power That