82

POLITICAL  ECONOMY

outgoings  equal  price  ;  but  it  does  not  pay
him  to  allow  it  to  assume  greater  proportions ­
  after  this  limit  has  been  reached.  We
may,  then,  lay  it  down  as  an  economic  law
that  in  every  industry,  be  it  agricultural,
manufacturing,  distributing  or  what  not,  the
marginal  expenses  of  each  economic  unit
known  as  a  business,  or  firm,  would  tend  to
equal  the  price  of  the  commodity  or  service
supplied.  We  need  not  trouble  to  enter  here
into  the  side  complications  which  would  have
to  be  introduced  into  this  exposition  to  meet
the  case  of  businesses  producing  things  of
several  sorts,  particularly  as  they  raise  no
fresh  theoretic  issues  of  outstanding  significance. ­

Let  us  go  back  for  illustration  to  our
boot-making  industry  and  imagine  that  it
comprises  half  a  dozen  firms.  Let  us  suppose
that  it  turns  out  in  the  aggregate  12,000
pairs  of  boots  a  year,  for  which  output  the
demand  price  and  the  cost  of  production
of  the  marginal  firm  are  both  14s.  Then  if
the  industry  is  in  a  position  of  perfect  equilibrium, ­
  which  implies  that  every  one  of  its
constituent  parts  is  in  a  position  of  perfect
equilibrium,  each  business  must  be  of  such
a  size  that  its  marginal  expenses  are  14s.,  and
its  total  expenses  are  less  than  its  marginal