Market Power & Indices Flashcards
(5 cards)
1
Q
what is the Lerner index formula
A
L = (P - MC) / P
2
Q
what does a high Lerner index mean
A
high market power (less competitive)
3
Q
why might monopoly profits not indicate market power
A
profits may be high relative to MC but not large relative to AC
4
Q
what does the four-firm concentration ratio measure
A
combined market share of the top 4 biggest firms in an industry
5
Q
what does CR4 > 80% indicate
A
a monopoly or near monopoly
