Answer:
B. 0.50
Explanation:
Lerner index = (price - marginal cost) / price
I guess that the question wasn't copied correctly, since it shouldn't say managerial costs, instead it should say marginal costs. And to be honest, marginal costs should either be $10 or $20, not $120 if the sales price is only $40.
Assuming a marginal cost of $20, then the Lerner index = ($40 - $20) / $40 = $20 / $40 = 0.5
The Lerner index measures the markup over marginal costs.
