GK
BUSINESS ECONOMICS
|
Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
|
The degree of monopoly power can be measured by the formula
|
|
(P - MC) / P
|
|
|
AR / (AR - MR)
|
|
|
MR / (AR - MR)
|
|
|
(AR -MR ) / MR
|
Explanation:
Detailed explanation-1: -The difference between price and marginal cost is the measure of the degree of monopoly power. If ‘P’ is the price and ‘MC’ the marginal cost, the formula for measuring the degree of monopoly power is P – MC/ P. The larger the gap between marginal cost and price, the stronger is the monopoly power.
Detailed explanation-2: -A monopolist can seek to maximize profits due to the absence of close substitutes, lack of competition, and barriers for new entrants. Monopoly power can be measured by the Lerner index, concentration ratio, price discrimination policy, profit rate, and Herfindahl-Hirschman index.
There is 1 question to complete.