This paper examines the relationship between price and marginal cost in U.S. industries. It finds that in most U.S. industries, prices are significantly higher than marginal costs. The analysis uses data on labor input and output to estimate the ratio of price to marginal cost. The method used is nonparametric and focuses on actual changes in costs rather than assuming profit maximization or specific cost functions. The results show that for total manufacturing and most two-digit industries, prices exceed marginal costs by a large margin. For total manufacturing, the gap is about 63% of marginal labor cost, and in some industries, such as paper and food and beverages, the gap is more than double marginal labor cost. The paper considers various explanations for these findings, including possible specification and data problems, but finds none that are plausible. It concludes that the findings strongly reject the hypothesis that marginal cost equals price. The paper also discusses the implications of these findings for economic theory and policy.This paper examines the relationship between price and marginal cost in U.S. industries. It finds that in most U.S. industries, prices are significantly higher than marginal costs. The analysis uses data on labor input and output to estimate the ratio of price to marginal cost. The method used is nonparametric and focuses on actual changes in costs rather than assuming profit maximization or specific cost functions. The results show that for total manufacturing and most two-digit industries, prices exceed marginal costs by a large margin. For total manufacturing, the gap is about 63% of marginal labor cost, and in some industries, such as paper and food and beverages, the gap is more than double marginal labor cost. The paper considers various explanations for these findings, including possible specification and data problems, but finds none that are plausible. It concludes that the findings strongly reject the hypothesis that marginal cost equals price. The paper also discusses the implications of these findings for economic theory and policy.