This paper examines the relationship between price and marginal cost in U.S. industries, finding that prices often exceed marginal costs. The analysis is based on data on labor input and output, which reveals that cyclical variations in labor input are small compared to variations in output. The paper estimates the ratio of price to marginal cost using a nonparametric method that does not assume a specific cost function. The results show that for total manufacturing and most two-digit industries, the gap between price and marginal cost is significant, with prices being about 63% higher than marginal costs. The paper discusses various explanations for this disparity, including monopoly power, monopsony in input markets, and increasing returns to scale, but finds that none of these explanations are plausible. The findings suggest that firms often operate with prices well above marginal costs, indicating a failure of the principle that marginal cost equals price. The paper concludes that these findings support the idea that competition is less prevalent than commonly believed and that theories of oligopoly and product differentiation may be more realistic.This paper examines the relationship between price and marginal cost in U.S. industries, finding that prices often exceed marginal costs. The analysis is based on data on labor input and output, which reveals that cyclical variations in labor input are small compared to variations in output. The paper estimates the ratio of price to marginal cost using a nonparametric method that does not assume a specific cost function. The results show that for total manufacturing and most two-digit industries, the gap between price and marginal cost is significant, with prices being about 63% higher than marginal costs. The paper discusses various explanations for this disparity, including monopoly power, monopsony in input markets, and increasing returns to scale, but finds that none of these explanations are plausible. The findings suggest that firms often operate with prices well above marginal costs, indicating a failure of the principle that marginal cost equals price. The paper concludes that these findings support the idea that competition is less prevalent than commonly believed and that theories of oligopoly and product differentiation may be more realistic.