If the demand for a firm's output is perfectly elastic,then the firm's Lerner Index equals
A) zero.
B) one.
C) infinity.
D) one-half.

Question

Quizplus · Accepted Answer

If the demand for a firm's output is perfectly elastic, it means that any increase in price by the firm will result in a quantity demanded of zero. In this case, the firm has no market power or pricing ability. Therefore, its Lerner Index, which measures the degree of market power, will be zero.

If the Demand for a Firm's Output Is Perfectly Elastic,then