ABSTRACT
As costs start to rise, the L-shaped curve reaches its lowest point and becomes the U-shaped curve, which stops the firm from expanding further. The marginal cost curve crossing the marginal revenue curve seems to allow for the highest possible profit. In the neoclassical approach, the marginal cost curve dictates the decision of how much to produce and which price to set, whereas fixed costs play no part in the marginal cost curve. Ludwig von Mises does not mention the concepts of marginal revenue and marginal cost while discussing the basic functions of profits and losses. The concept of markup pricing enriches calculation arguments and the entrepreneurial approach to the theory of pricing. Part of the empirical research on pricing by managers actually confirms this view: managers give reasons for not raising prices that include fear of competition and a preference for higher turnover. The reality of pricing seems to run against the practice of ignoring fixed costs.
