Consider a perfectly competitive industry where inverse mark

Consider a perfectly competitive industry where inverse market demand is p(Q) = 175 5Q and rm costs are C(qi) = 2qi. The Lerner Index in the long-run equilibrium is (a) 0 (b) 0.5 (c) 1 (d) 75 (e) More information is needed to determine the Lerner Index.

Solution

Given,

Inverse Market Demand p(Q) = 175 - 5Q

Firm Cost C(qi) = 2qi

For a perfectly competitive industry the Learner Index = 0 , since P= MC and such a firm will not have any market power.

Therefore the correct answer is option (a) 0