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LERNER INDEX: The difference between price (p) and marginal cost (mc) as a fraction of price, that is [p-mc]/p. The Lerner index is usually taken as an indicator of market power because the larger the index, the larger the difference between price and marginal cost, that is, the larger the distance between the price and the competitive price. The Lerner index depends on the elasticity of demand. The Lerner index is also called the price-cost margin.

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Lesson Contents
Unit 1: The Basics
  • Opportunity Cost
  • Cost Times Two
  • Profit Times Three
  • Unit 1 Summary
  • Unit 2: Three Totals
  • Fixed And Variable
  • A Table Of Totals
  • Total Curves
  • TP And TVC
  • Unit 2 Summary
  • Unit 3: Four More Measures
  • Three Averages
  • A Table Of Averages
  • Average Curves
  • One Marginal
  • A Marginal Table
  • The Marginal Curve
  • Unit 3 Summary
  • Unit 4: Long-Run Cost
  • Doing The Long Run
  • A Choice Of Plants
  • Planning Curve
  • Scale Economies
  • Unit 4 Summary
  • Unit 5: Previewing Supply
  • Production Stages
  • Marginal Cost
  • Unit 5 Summary
  • Course Home
    Cost

    • The first unit of this lesson, The Basics, begins this our study with a review of the opportunity cost notion and how it relates to business activity.
    • In the second unit, Three Totals, we take a look at the three total cost measures, including total cost, total variable cost, and total fixed cost.
    • The third unit, Four More Measures, then presents four additional cost measures -- average total cost, average variable cost, average fixed cost, and marginal cost.
    • In the fourth unit, Long-Run Cost, we examine how scale economies and diseconomies affect cost in the long run.
    • The fifth and final unit, Previewing Supply, then closes this lesson by previewing the importance of cost, especially marginal cost, to the supply decision by a firm.

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    MARGINAL COST OF SEARCH

    The incremental cost incurred by additional search effort is the marginal cost of search. Marginal cost of search, also termed marginal search cost, is comparable to marginal cost of short-run production analysis. Marginal cost of search increases with an increase in search effort and is represented by the marginal cost of search curve. This is one half of the efficient information search decision. The other is marginal benefit of search.

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    Today, you are likely to spend a great deal of time browsing about a thrift store trying to buy either a pair of leather sandals that won't cause blisters or clothing for your kitty cats. Be on the lookout for spoiled cheese hiding under your bed hatching conspiracies against humanity.
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    The Dow Jones family of stock market price indexes began with a simple average of 11 stock prices in 1884.
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