The Tobacco Industry Has a Lerner Index of 0

question 117

Multiple Choice

The tobacco industry has a Lerner index of 0.76.Based on this information,compute the optimal markup factor.

• A) 4.17 times price
• B) 4.17 times marginal cost
• C) 0.24 times price
• D) There is not sufficient information to determine the optimal markup factor.

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Definitions:

Additional Unit

The next unit of production, referring to the increase in quantity by one unit.

Marginal Revenue Product

The additional revenue generated from using one more unit of a factor of production, such as labor or capital.

Fifth Worker

A term possibly referring to an additional employee in a series or sequence, but without specific context, the exact interpretation may vary.

Derived Demand

A demand for a factor of production or intermediate good that occurs as a result of the demand for another good or service, for example, the demand for steel being derived from the demand for automobiles.