Firms that charge a price for their output in excess of marginal cost in the short run
A)are not maximizing profits.
B)cannot find buyers for their output.
C)are charging a markup.
D)will suffer huge losses.

Question

Quizplus · Accepted Answer

Firms that charge a price for their output in excess of marginal cost in the short run are said to be charging a markup. This is a common practice among firms, as it allows them to earn profits in the short run. However, this practice does not necessarily mean that the firm is maximizing its profits. It is possible for a firm to earn a positive profit even if its price exceeds marginal cost by only a small amount. It is also possible for a firm to charge a markup and still suffer losses if its fixed costs are too high.

Firms That Charge a Price for Their Output in Excess