This is what all rational businesses without real competition do. Using costs to set prices is throwing money away, unless your costs are higher than your prices for a strategic reason and you're calculating how long you can continue doing that before you miss payroll.
Is that abusive to the customer? Let's say it isn't. It can still cause problems, in various subtle ways.
If we come back to this inflation scenario: agencies and governments are currently debating what interventions to take. Depending on the root cause, they'll pick different things. If something like "companies taking advantage of herd behavior and shocks to the system to raise prices even more than is necessary based on underlying factors" is completely ignored, the prescription will focus more harshly on those underlying factors and quite likely cause more total harm than is necessary (by, say, tightening up money to the point of causing much more unemployment than would be needed if we had a knob to turn on corporate price rises).
I disagree with this on two points: not all businesses do this, and this behavior is is not related to whether or not the business is "rational".
Some businesses actually do operate in a way that doesn't abuse their customers. Forgoing usurious profit margins doesn't count as "throwing money away" any more than not picking the pockets of people around you counts as "throwing money away".
High prices is only "abuse" if there is a monopoly on that good and there is no substitute. Which, yes that is bad, we should stop it. BUT even a true monopoly doesn't explain a generalized increase in prices where consumers do not react to higher prices on A by reducing spending on B.
Edit: Of course there is variance in the degree to which owners will pursue profit maximization, up to and including "I am already rich and I will operate this at a loss for the good of the public", but the median (or even 75th percentile) firm I don't think is at "pass all cost savings onto customers even if I'm leaving money on the table."
> Are the customers idiots who can't be trusted how to allocate their money?
Of course not. But you seem to be assuming that the only reasons people might pay absurd prices for something is because there is no competition or they're stupid. I don't think that's the case. There are a lot of other circumstances where people have little choice but to pay crazy high prices for things.
Personally, I regard this as an ethical thing. I think that it's not ethical to overcharge for stuff. I set prices by determining the cost to produce the thing and adding a reasonable profit margin to that, because I couldn't sleep at night doing it any other way.
> I will operate this at a loss for the good of the public
I am not advocating that any business operate at a loss.