Question

The Lerner index in the paper industry is 0.58. Based on this information, a firm charging $3.25 per ream of paper should have a marginal cost of:

Answer 1

Marginal cost = $1.365

Step-by-step explanation:

The formula for calculating Learner Index is as follows:

Learner Index = (P - MC) / P

0.58 = (3.25 - MC) / 3.25

3.25 - MC = 0.58*3.25

3.25 - MC = 1.885

MC = 3.25 - 1.885

MC = $1.365