Homework Answers
The price / marginal cost ratio was 349 / 84 = 4.155
Lerner index is given by (P - MC)/P or (349-84)/349 = 0.76
Elasticity of demand = 1/lerner index = 1/0.76 = 1.316 in absolute value.
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Exercise 4. In 2015, Apple introduced the Apple Watch. According to HIS, the cost of producing...
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(2.5jln 2015, Apple introduced the Apple Watch. According to HIS, the cost of produc- ing the 38mm Apple Watch Sport was $84. The price was $349. What was Apple's price/marginal cost ratio? What was its Lern- er Index? If Apple is a short-run profit-maxi- mizing monopoly, what elasticity of demand did Apple believe it faced? C
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