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Question 11 3 p When a firm conducts limit pricing, it should if it wants the strategy to work. lower the price below the ATC
D Question 12 3 pts A perfectly competitive firm has a lerner index equal to its marginal cost. zero. one. its price.
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Answer #1

(1) A firm maximizes profit at MR = MC.

When a firm conducts limit pricing, it sets a price below the marginal cost in order to keep potential entrants out of the market.

When a firm conducts limit pricing, it should lower the price below the marginal cost if it wants the strategy to work.

Answer: Option ((D)

(2) Lerner index: L = (P - MC) / P

In perfect competition, P = MC

So, L = (MC - MC) / P

L = 0 / P

L = 0

A perfectly competitive firm has a lerner index equal to zero.

Answer: Option (B)

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