Final answer:
The Lerner Index rate for the can of soup is 0.2326 and the mark-up is 29%.
Step-by-step explanation:
The Lerner index, measured as the percentage markup of price above marginal cost, (P-MC)/P, has often been used as a measure of a firm's market power. The Lerner index always has a value between zero and one. For a textbook-perfectly competitive firm, P=MC so that L=0. The Lerner Index is a measure of market power or monopoly power. It is calculated as the difference between the price and the marginal cost, divided by the price.
In this case, the price of the can of Wolverine Chicken Noodle Soup is $1.29 and the marginal cost is $1.00. Using these values, the Lerner Index rate can be calculated as follows: Lerner Index rate = (Price - Marginal Cost) / Price = (1.29 - 1.00) / 1.29 = 0.2326. The mark-up can be calculated as the percentage difference between the price and the marginal cost: Mark-up = (Price - Marginal Cost) / Marginal Cost = (1.29 - 1.00) / 1.00 = 0.29 = 29%.