You are advising two firms from different industries

Marketing Jan 15, 2021

You are advising two firms from different industries.

The firm in industry A has MC of production equal to$125 and they know from historical experience that their Lerner index is 0.2.

The firm in industry B has an MC of production equal to $35 and they know from historical experience that their Lerner index is 0.55.

a. Determine the optimal price that both firms should be charging.

b. Which firm is more likely to earn excess profits in the long run, explain using your understanding of the connection between the Lerner index and industry concentration.

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