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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 18: Banking | Unit 4: Regulating Banks Page: 21 of 24

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  • That banking is one of the most heavily regulated industries in the economy.
  • The main reasons of bank regulations:
    • When balance between profit and safety fails, customers lose trust and banks may have to shut down.
    • Banks control 60% of the M1 money supply.
  • The problems for the economy when banks get carried away seeking profits without having enough deposit-protecting reserves.
  • The main institutions which regulate banking activities and their main functions: Federal Reserve System (Fed), Federal Deposit Insurance Corporation (FDIC), and Comptroller of the Currency.
  • The ways in which banks are regulated.

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AVERAGE FACTOR COST, PERFECT COMPETITION

Total factor cost per unit of factor input employed by a perfectly competitive firm in the production of output, found by dividing total factor cost by the quantity of factor input. Average factor cost, abbreviated AFC, is generally equal to the factor price. However, using the longer term average factor cost makes it easier to see the connection to related terms, including total factor cost and marginal factor cost.

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Today, you are likely to spend a great deal of time at a flea market wanting to buy either a case for your designer sunglasses or arch supports for your shoes. Be on the lookout for crowded shopping malls.
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The New York Stock Exchange was established by a group of investors in New York City in 1817 under a buttonwood tree at the end of a little road named Wall Street.
"A ship ought not to be held by one anchor, nor life by a single hope. "

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