MONOPOLY

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entailed  by  the  manufacture  of  the  addition
to  his  output  represented  by  the  foreign  sales,
for  if  it  did  the  kind  of  dumping  which  we
have  in  mind  would  mean  buying  halfcrowns
  at  two  shillings  apiece.  But  cost
of  production  may  be  understood  as  the
average  cost  (cost  per  unit  of  output)  of
the  whole  of  the  industry’s  output.  Now,
foreign  sales  beneath  cost  of  production  so
understood  will  prove  worth  while,  provided
that  the  foreign  price  is  in  excess  of  the
addition  made  to  the  aggregate  costs  of  the
industry  by  the  production  of  what  was
exported,  when  this  addition  to  cost  is
reckoned  per  unit  of  the  exported  output.
The  implication  is  that  the  industry  is
subject  to  increasing  returns.  The  seemingly
unremunerative  foreign  sales  pay  because
of  the  benefits  resulting  from  the  increasing
returns.  Making  regular  provision  for  the
foreign  market  necessitates  enlarging  the
industry  and  the  enlarged  industry  brings
about  in  the  long  run  a  lower  cost  of  production ­
  per  unit  of  what  is  turned  out.  The
seeming  loss  in  the  distant  markets  may  be
more  than  recouped  by  the  reduction  in  the
cost  of  things  sold  on  favourable  terms  at
home.