The More Elastic the Demand Facing a Firm

question 105

Multiple Choice

The more elastic the demand facing a firm,

• A) the higher the value of the Lerner index.
• B) the lower the value of the Lerner index.
• C) the less monopoly power it has.
• D) the higher its profit.

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Definitions:

Entrepreneurs

Individuals who, rather than working as employees, run a business and assume all the risks and rewards of a given business venture, idea, or good or service offered for sale.

Allocative Efficiency

A state of resource distribution where resources are allocated in a way that maximizes the total benefit received by all members of society.

Purely Competitive Industry

An industry characterized by many small firms producing identical products, where no single firm can influence the market price.

Demand

The volume of goods or services that consumers are prepared and financially able to buy at a range of prices within a set period.