Suppose a Firm's Inverse Demand Curve Is P = 100

question 31

Multiple Choice

Suppose a firm's inverse demand curve is P = 100 - Q, and its marginal cost is constant at $20. What is the value of the Lerner index at the profit-maximizing quantity?

• A) 0.67
• B) 0.80
• C) 0.22
• D) 0.33

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Definitions:

Accrual-Basis Accounting

An accounting method where revenue is recorded when earned and expenses are recorded when incurred, regardless of cash flow.

Unearned Revenue

Income received by a business for goods or services yet to be provided, often recorded as a liability on the balance sheet until the revenue is earned.

Accrued Revenue

Income that a company has earned but has not yet received payment for.

Depreciation

The methodical distribution of a physical asset's cost across its lifespan, mirroring its depreciation over time.