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QUESTION
Firm A in Industry A has marginal cost of production equal to $150 and experience has shown Firm A that their Lerner index is 0.
Firm A in Industry A has marginal cost of production equal to $150 and experience has shown Firm A that their Lerner index is 0.35
Firm B in Industry B has a MC of production equal to $25 and historical experience indicates their Lerner index is 0.6
a) What is the optimal price each firm should charge?
b) Which firm is more likely to earn greater profits in the long run? Why?
