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Lecture22 - Lecture 22 More on the Lerner Index Supply...

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Lecture 22 More on the Lerner Index Supply curves for monopoly Why are there monopolies Social Costs of Monopoly
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More on the Lerner Index The Lerner Index shows that the price-cost markup as a percent of price is inversely related to the price elasticity of demand: This expression can be rearranged to relate price directly to marginal cost and the demand elasticity: d E P MC P 1 = d d d E MC P E P MC E P MC P MC P 1 1 1 1 1 1 + = → + = = =
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