Calculating degree of monopoly power using Lerner index.
A monopolist faces the demand curve p = 11-Q , where Q is measured in thousands of units. The monopolist has a constant average cost of $6 per unit.
a) Calculate the firm's degree of monopoly power using the Lerner index?
b) A government regulatory agency sets price ceiling of $7 per unit. Find out quantity produced? Profit? What happen to the degree of monopoly power?