The Lerner Index ranges from zero to one. The more market power that a firm holds, the higher the index. This is because greater market power allows firms the ability to charge higher prices than it costs to produce the good. In perfect competition, firms have no market power and the market price is the same as the cost of production, resulting in a Lerner Index of 0. Because of this, the Lerner Index is a good measure of how much market power a monopoly holds.