A markup is only possible when a firm enjoys some degree of
A) profit.
B) market power.
C) excess capacity.
D) efficient scale.
E) substitutability.

Question

Quizplus · Accepted Answer

A markup is a measure of a firm's ability to charge a price that is above the cost of production. Market power refers to the ability of a firm to influence price by altering the quantity supplied. Therefore, a firm with market power has the ability to set prices above the competitive level and earn a markup. Profit, excess capacity, efficient scale, and substitutability do not necessarily confer market power.

A Markup Is Only Possible When a Firm Enjoys Some