linguistic:translation, structural:summarization
Although the term markup is sometimes used in economics to refer to the difference between a monopoly price and the monopoly's MC, it is frequently used in American accounting and finance to define the difference between the price of the product and its per unit accounting cost. Accepted neo-classical micro-economic theory indicates the American accounting and finance definition of markup, as it exists in most competitive markets, ensures an accounting profit that is just enough to solely compensate the equity owners of a competitive firm within a competitive market for the economic cost (opportunity cost) they must bear if they hold on to the firm's equity. The economic cost of holding onto equity at its present value is the opportunity cost the investor must bear when giving up the interest earnings on debt of similar present value (they hold onto equity instead of the debt). Economists would indicate that a markup rule on economic cost used by a monopoly to set a monopoly price that will maximize its profit is excessive markup that leads to inefficiencies within an economic system.