Consider a perfectly competitive industry where inverse mark

Consider a perfectly competitive industry where inverse market demand is p(Q) = 175 - 5Q and firm costs are C(q_1) = 2q_i. The Lerner Index in the long-run equilibrium is More information is needed to determine the Lerner Index.

Solution

Lerner Index = P - MC / P

   [Where P = market price set by the firm and MC is the firm\'s marginal cost].

The profit maximization condition of perfectly competitive industry is where P = MC

Accordingly, Lender index in this case will be 0.