User talk:Rscragun
Rscragun,
You're misunderstanding the difference between "Accounting Cost" and "Economic Cost"; and this is leading you to misuse what is solely an Accounting Term by indicating it is also an Economics Term. There is no "Cost-Plus-Markup" in Economics (the term is solely used in American Accounting); there is only a "[Monopoly profit] Term" in Economics. The firm sets a "Monopoly Price" in order to ensure it has a "Monopoly profit". Yes, the "Monopoly Price" is above the "Marginal (Economic) Cost" of the firm; but a "Competitive Price" within a Competitive Market usually includes a "Cost-Plus-Markup"! I.e., since the "Cost-Plus-Markup" usually contains "Accounting Profit" that goes to the firm's Equity owners (the firm's owners). The Equity Owner must get at least a "Rate of Return on Equity" that is no smaller than the Rate of Interest on Debt because the Rate of Interest on Debt is actually an "Economic Cost" (or "Opportunity Cost") associated with holding onto Equity instead of Debt; resulting from the fact that the Equity Holder must forgo the certain Interest he could obtain on the same dollar amount in Debt when he buys Equity (Shares) in the firm. So, the "Accounting Profit" associated with the "Cost-Plus-Markup" is actually better associated with "Economic Cost"; and the the "Cost-Plus-Markup" will exist in a firm with no Monopoly profit in order to compensate Equity Owners for the "Economic Cost" associated with having to give up Interest Revenue in order to purchase (Shares) of the firm's Equity. In such a firm, with no [Monopoly profit], Marginal Cost = Price = Marginal Revenue, and the "Cost-Plus-Markup" is solely an "Economic Cost" within a "Competitive" (non-Monopoly) situation.
Therefore, I am removing the reference to "Markup" in this section. Instead, I will refer to "Monopoly Profit", such that the "Monopoly Price" occurs when the "Marginal Revenue" = "Marginal Cost", but is well below the "Monopoly Price. The Competitive Cost-Plus-Markup is well below the Monopoly "Unit Contribution Margin" (going back to the appropriate Accounting term to verbally represent the Monopoly Profit). Please note that the Monopoly "Unit Contribution Margin" is much greater than the Unit Monopoly Profit; since you must deduct the Normal Competitive "Cost-Plus-Markup" from the Monopoly "Unit Contribution Margin" in order to calculate the per unit Monopoly Profit (the difference between Marginal Economic Cost and the Price). MGMontini (talk) 19:27, 25 April 2014 (UTC)
Rscragun,
I have a Graduate degree in Economics associated with Ph.D Economics Classes, and have worked as a Senior Accountant for 20 years (with the education that is also enough to qualify for the CPA in America). Not once have I ever heard of the word "Markup" in any "Economics" discussion. Solely in a discussion dominated by "Accountants". Please, indicate to me a Graduate Level College Economics Text book that uses the term "Markup" in talking about "Economic Profit". You do not have enough citations here! You also show no mathematical derivation for your Monopoly formula (I still have to check that for correctness - however it seems correct at first glance). What I have said is not false! Please submit the appropriate references to back up your discussion.
- This Article was obtained from a redirect from "Monopoly Price"; and the reference about the use of the Elasticity of Demand is directly associated with "Monopoly Price" and the related "Monopoly Profit"! There is definitely something wrong with the Title of the Article, its redirect, etc. Rules are that you give references; why aren't there associated references for your use of the term "Markup" as you are using it for "Economics"??? Thanks.