Determine optimal price that both firms should be charging

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Reference no: EM13981933

There are 2 firms to consider here from 2 different industries.

A firm in Industry A has MC of production = $150 and they know from historical experience that their Lerner index is 0.35.

A firm in Industry B has MC of production = $25 and they know from historical experience that their Lerner index is 0.6.

a. Determine the optimal price that both firms should be charging.

b. Articulate which firm is more likely to earn ‘excess profits’ in the long run…and explain why this is your answer using your understanding of the connection between the Lerner index and industry concentration.

Reference no: EM13981933

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