The sensor that monitors the output bin is broke, jammed or missing.
At the top of the printer where the paper exits and lays flat. There should be a plastic rod that goes from one side to the other.
It has rollers on it to pull the paper out. There should also be a black plastic flag that goes up and down as paper comes out of the printer. Use a flash light if you have to. Move the flag with your finger up and down. It should almost float. If it is stuck in the up position it causes the printer to think that the output bin is filled up with paper. If it is stuck push it down gently. Make sure that it lifts and that gravity pushes it down.
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