Question

A firm has $1.5 million in sales, a Lerner index of 0.57, and a marginal cost of $50, and competes against 800 other firms in its relevant market. Instructions: Enter your responses rounded to the nearest two decimal places. a. What price does this firm charge its customers

Answer 1

$116.28

Step-by-step explanation:

This can be calculated as follows:

Mark up = [1 ÷ (1 - Lerner index)]

Price = Mark-up × Marginal cost

= [1 ÷ (1 - 0.57)] × $50

Price = [1 ÷ 0.43] × $50 = $116.28

Therefore, the price this firm will charge its customers is $116.28.