As the Ratio of Price to Marginal Cost Decreases,the Lerner

question 59

Multiple Choice

As the ratio of price to marginal cost decreases,the Lerner index

• A) stays the same.
• B) increases.
• C) decreases.
• D) can increase or decrease depending upon the shape of the demand curve.

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Definitions:

Direct Method

A way of allocating service department costs directly to production departments without any consideration for services rendered between service departments.

Operating Activities

Activities that relate directly to the operation of the company, including production, sales, and day-to-day administrative functions.

Net Sales Adjusted

The revenue a company generates from its primary operations after deducting returns, allowances, and discounts.

Direct Method

A way of allocating service department costs directly to production departments without intermediate steps.