economist Abba Lerner. The Lerner index is a measure of market power — the ability of a firm to charge a price that exceeds marginal cost. The index varies from zero (when demand is infinitely elastic (a perfectly competitive market) to 1 (when demand has an elasticity of −1). The closer the index value is to 1, the greater is the difference between price and marginal cost. The Lerner index increases as demand becomes less elastic. Alternatively, the relationship can be expressed as: P = MC/(1 + 1/e). Thus, for example, if e is −2 and MC is $5.00 then price is $10.00. Example If a company can sell 10 units at $20 each or 11 units at $19 each, then the marginal revenue from the eleventh unit is (11 × 19) − (10 × 20) = $9. See also Cost curve Profit maximization Notes References Landsburg, S 2002 Price Theory & Applications, 5th ed. South-Western. Perloff, J., 2008, Microeconomics: Theory & Applications with Calculus, Pearson. Pindyck, R & Rubinfeld, D 2001: Microeconomics 5th ed. Page Prentice-Hall. Samuelson & Marks, 2003 Managerial Economics 4th ed. Wiley O'Sullivan, Arthur; Sheffrin, Steven M. (2003). Economics: Principles in Action. Pearson Prentice Hall. . Revenue Marginal concepts