A firm has $1.5 million in sales, a Lerner index of 0.57, and a marginal cost of $50, and competes against 800 other firms in its relevant market. a) What price does this firm charge its customers? b) By what factor does this firm mark up its price over marginal cost? c) Do you think that this firm enjoys much market power? Explain.
A firm has $1.5 million in sales, a Lerner index of 0.57, and a marginal cost of $50, and competes against 800 other firms in its relevant market. a) What price does this firm charge its customers? b) By what factor does this firm mark up its price over marginal cost? c) Do you think that this firm enjoys much market power? Explain.
Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
14th Edition
ISBN:9781305506381
Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Chapter11: Price And Output Determination: Monopoly And Dominant Firms
Section: Chapter Questions
Problem 1.2CE
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A firm has $1.5 million in sales, a Lerner index of 0.57, and a marginal cost of $50, and competes against 800 other firms in its relevant market.
- a) What price does this firm charge its customers?
- b) By what factor does this firm mark up its price over marginal cost?
- c) Do you think that this firm enjoys much market power? Explain.
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