Question
In: Economics
Which functional form the Lerner Index adopts? Transfer the Lerner Index to the Amoroso Robinson relation!
Which functional form the Lerner Index adopts?
Transfer the Lerner Index to the Amoroso Robinson relation!
Solutions
Expert Solution
Given by Abba Lerner in the year 1934. It talks about the market power of the firm. It is a relationship between the elasticitiies and the price margins of the firm. It takes the following functional form:
L=P-MC/P
where P is the price,MC is the marginal curve
Since it talks about elasticities, it cannot be more than 1 and the absolute value cannot be less than 1.It tells us which firms will operate on the elastic part of the demand curve.
The Amoroso–Robinson relation is the relationship which is given by Luigi Amoroso and Joan Robinson. It states a relationship between price,marginal cost and the elasticity. The relationship is similar to that of the Lerner's index given by Abba Lerner.
ДR/Дx = p(1+1/Ex,p)
where
- ДR/Дx is the marginal revenue,
- x is the particular good,
- p is the price of the good
- Ex,p is the price elasticity of demand.
The relationship between the 2 can be seen from the formula directly.
Rahul Sunny answered 1 year agoRelated Solutions
Food industry, Lerner Index = 0.26 and markup factor = 1.35 Tobacco industry, Lerner Index =...
Food industry, Lerner Index = 0.26 and markup factor = 1.35
Tobacco industry, Lerner Index = 0.76 and markup factor =
4.17
Textiles industry, Lerner Index = 0.21 and markup factor =
1.27
Apparel industry, Lerner Index = 0.24 and markup factor =
1.32
We have four different industries, explain how to interpret the
HHI measure for each of the four industries chosen.
The following relates to the Lerner Index. Which of the following statements is (are) true? I....
The following relates to the Lerner Index.
Which of the following statements is (are) true?
I.
Firms have less power to take advantage of consumers in a market
when consumers are very price sensitive.
II.
If P = $100 and MC = $60, the Lerner index =
0.40.
III.
If the price elasticity of demand is -2.0, the Lerner index is
0.50.
IV.
A monopolist has more mark-up power if | Ed|
=0.25 rather than if | Ed| =10
The following relates to the Lerner Index. Which of the following statements is (are) true? I....
The following relates to the Lerner Index.
Which of the following statements is (are) true?
I.
Firms have less power to take advantage of consumers in a market
when consumers are very price sensitive.
II.
If P = $100 and MC = $60, the Lerner index =
0.40.
III.
If the price elasticity of demand is -2.0, the Lerner index is
0.50.
IV.
A monopolist has more mark-up power if | Ed|
=0.25 rather than if | Ed| =10
A....
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Based on the information given below, indicate for each of the
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of perfect competition, monopoly, monopolistic competition, or
oligopoly.
a) Industry A has a four-firm concentration ratio of 0.005% and
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b) Industry...
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a Herfindahl-Hirschman Index, a Lerner index, and a Rothschild
index.
Based on the information given below, indicate for each of the
following, whether the industry is best characterized by the model
of perfect competition, monopoly, monopolistic competition, or
oligopoly.
a) Industry A has a four-firm concentration ratio of 0.005% and
an HHI of 75. A representative firm has a Lerner index of 0.45 and
a Rothschild index of 0.34.
b) Industry...
True or false? a) “Under perfect competition the value of the Lerner Index is equal to...
True or false?
a) “Under perfect
competition the value of the Lerner Index is equal to 0.”
_____________
b) “In a
monopolistic market the deadweight loss does not always occur”.
_____________
c) “The existence
of scale economies is the main reason for the existence of
multiproduct firms”. _____________
d) “The short run
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curves of all the firms in the industry.” ______________
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Explain the purpose of using metric such as the lerner index in
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