Businesses buy products at a cost price and then markup the products to cover the expenses (overhead) of running the business and the desired profits. Markup is also referred to as margin or gross profit. It is the difference between the cost of a good or service and its selling price. A markup is added on to the total cost incurred by the producer of a good or service in order to create a profit.
When product markets are characterized by a lack of competition, firms may be able to charge a mark-up over their marginal costs and achieve monopoly rents. If such rents persist over time, and if they can be related to specific barriers to competition, prices are higher than they ought to be and output is lower than it could be.
The mark-up of product prices over marginal costs as one of the more direct indicators of monopoly power.
Mark-up pricing
