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Microeconomics II
book

Microeconomics II

by D.N. Dwivedi
August 2011
Intermediate to advanced content levelIntermediate to advanced
368 pages
14h 51m
English
Pearson India
Content preview from Microeconomics II
Price and Output Determination Under Monopoly 73
monopoly power is ratio of P MC to P, where P is equilibrium price. us, the degree of monopoly
power (M
p
) may be measured as
M
P
P
p
=
MC
where P = price, MC = marginal cost.
Since for a prot maximizing rm, MR = MC, Lerner’s measure of monopoly power may also be
expressed as,
M
P
P
p
=
MR
Since P/(P MR) = e (elasticity), (P MR)/P = 1 /e. It means that M
p
equals the reciprocal of elasticity.
us, Lerner’s measure of monopoly power may also be expressed as M
p
= 1/e. It may thus be inferred
that lower the elasticity, the greater the degree of monopoly, and vice versa. According to Lerner’s
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Publisher Resources

ISBN: 9788131797655