If a Monopoly's Lerner Index Exceeds 1,then

question 57

Multiple Choice

If a monopoly's Lerner Index exceeds 1,then

• A) it is earning maximum profit.
• B) it has ultimate market power.
• C) it must be pricing below marginal cost.
• D) marginal revenue is negative.

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Definitions:

Absorption Costing

is an accounting method that includes all manufacturing costs—direct materials, direct labor, and both variable and fixed manufacturing overhead—in the cost of a product.

Unit Product Cost

The total cost incurred to produce, manufacture, or acquire a product, divided by the total number of units produced.

Absorption Costing

A financial recording approach that encompasses all production expenses, such as direct materials, direct labor, and overhead costs, within the price of a product.

Net Operating Income

Income from normal business operations after subtracting operating expenses but before interest and taxes.