In: Economics
What is meant by Monopoly Power? Explain.
a. How is it measured?
b. Why is it measured in that particular way?
c. Give two examples of Companies that have Monopoly Power. Explain why you believe that is the case.
Monopoly power occurs when a firm has a dominant position in the market. A pure monopoly is when one firm has 100% of the market share. A firm might be considered to have monopoly power with more than 25% market share..
Economists use the Lerner Index to measure monopoly power, also called market power. The index is the percent markup of price over marginal cost. The Lerner Index is a positive number (L >= 0), increasing in the amount of market power.