Define market power in terms of market structure; why is market power equal to zero in...

Define market power in terms of market structure; why is market power equal to zero in competitive equilibrium ? (Note: A commonly used metric for market power is the Lerner Index, defined as : =(p-MC)/MC.

Expert Solution

Market power can be defined as the ability of a firm (or group of firms) to manipulate the price of a product with the manipulations in the level of demand, supply, or both. The Lerner Index (=(p-MC)/MC) refers to the measure of market power: the ability of a firm to increase the price above marginal cost. Lerner Index equal to zero (L = 0) for the perfectly competitive firm because the price is equal to marginal cost (P = MC). Cournot firm’s Lerner Index would be depending on the elasticity that the firm experiences. There is an inverse relationship between elasticity of demand and Lerner Index i.e. -1/Ed. The perfectly-competitive firm will not set its price higher than its marginal cost because it has a horizontal demand curve thus indicating that if the firm charge a price exceeding its marginal cost, it will experience a zero revenue because the customers will switch to its competitors

Rahul Sunny answered 8 months ago

Find at least 4 non zero terms of the power series (around 0) for the solution...

Find at least 4 non zero terms of the power series (around 0) for the solution to the initial value problem y"+ (4 + x)y' − 2y = sin(4x), y(0) = −1, y' (0) = 2. Over what interval is the solution analytic and why? What is the radius of convergence of the series solution around 0?

Suppose the market demand is given by: Q=125-25P and that MC is equal to zero. There...

Suppose the market demand is given by: Q=125-25P and that MC is equal to zero. There are no fixed costs. Solve (a)-(d) as a Cournot model. (a). Write down the profit maximization function for each firm. (b). Calculate the FOC’s and find the best response functions (BR1(q2) and BR2(q1)) (c). Describe what a “best response function” is in words. What must be true for best responses at the Nash equilibrium? (d). Calculate the Nash equilibrium (quantities) in this market and...

Which market structure is least likely to result in a firm having market power? a. 2,000...

Which market structure is least likely to result in a firm having market power? a. 2,000 b. 1,600 c. 2,200 d. 2,750

what are the characteristic of the perfect market structure? Why is that this market is the...

what are the characteristic of the perfect market structure? Why is that this market is the only one efficient ?

Can there ever be equal bargaining power between unions and management? Why or why not? Include...

Can there ever be equal bargaining power between unions and management? Why or why not? Include the union’s bargaining power and management’s bargaining power in your submission.

Can there ever be equal bargaining power between unions and management? why or why not? include...

Can there ever be equal bargaining power between unions and management? why or why not? include unions bargaining power and managements bargaining power

Define Market Structure in Economics ? Define Perfect Competition. Define Imperfect Competition. 3.) Describe the Perfect...

Define Market Structure in Economics ? Define Perfect Competition. Define Imperfect Competition. 3.) Describe the Perfect Competition Firm's Demand Curve and explain why it's that shape. For an Industry in Perfect competition, when is it possible to Enter and Exit the market?[ The Market Supply Curve is determined by What 5 Determinates? 5.) What is a Monopoly (define and explain)? The Market Supply Curve is determined by What 5 Determinates? Explain each determinate.

Find first four non zero terms in a power series expansion about x=0 for a general...

Find first four non zero terms in a power series expansion about x=0 for a general solution to the given differential equation. (x^2 +21)y''+y=0

Show a firm that is earning zero economic profits, but has some market power. Then, assume...

Show a firm that is earning zero economic profits, but has some market power. Then, assume this market power is entirely eliminated when a new competitor enters the market with the same technology and produces a perfect substitute. Showing in your diagram how the firm must adjust its production level to most effectively compete with the new entering firm, explain why maintaining competition is important.

46. In terms of “market power” which of the below is correct, going from the firms...

46. In terms of “market power” which of the below is correct, going from the firms with the most to the least “market power’? (Hint: envision the “level of competition” spectrum) oligopoly, monopoly, perfect competition, monopolistic competition monopoly, oligopoly, monopolistic competition, perfect competition perfect competition, monopolistic competition, oligopoly, monopoly monopolistic competition, monopoly, oligopoly, perfect competition 43. A cartel is (e.g. OPEC ) an agreement among rival firms to set prices independently a group of monopolistically competitive firms which charge the...

Question