A firm's markup is the amount by which its price exceeds its marginal cost, expressed as a percentage of its price. It is a measure of the firm's pricing power and ability to generate profits. A high markup indicates that the firm is charging a premium for its product or service, while a low markup suggests that the firm is operating in a competitive market where prices are driven close to marginal cost.

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A Firm's Markup

Question 8

Multiple Choice

A firm's markup:

A) is the amount by which its price exceeds its marginal cost, expressed as a percentage of its price.
B) is the amount by which its marginal cost exceeds its average cost.
C) is the amount by which its average cost exceeds its marginal cost.
D) is the value of its profit.

Correct Answer: