50

ECONOMIC PRINCIPLES

The scale of production, with reference to which an
individual producer will need to consider the costs of production
 which he must incur in contributing to the market
supply, may be determined by the nature of the business in
which he engages and the facilities he can command. Thus
an agriculturist is limited by the extent and quality of the
land he can control, and by the climate, among other influences.
 In other lines of production, while personal
capacity and command of capital may be important considerations,
 the attainment of facilities for production, and a
scale of output, of the same order as that of other typical
businesses with which it is proposed to compete, may be
reasonably contemplated in planning such competition.
The economies which belong to the organisation of a
business on such a scale may be counted on to reduce expenses,
 as well as the advantages of market organisation and
the like which characterise the state of development of the
industry in which the particular business is concerned.
Where the conditions of decreasing costs prevail, an enterprise
 which cannot anticipate the attainment of a full share
in such economies will need to count on some counterbalancing
 advantage special to itself, in order to meet the
“representative ” business in competition without sacrificing
part of that profit which is the inducement to its organisation.
If, on the other hand, special conditions enable effective
organisation on a larger and more economical scale than
that of the “representative” business to be undertaken, no
more of the profits of such economy will need to be sacrificed
than suffice to enable the large output to be profitably
marketed ; that is to say, that the cost of production in such
exceptionally placed businesses will not be the costs which
condition the extent of the total supply. This could only
be the case if the industry were in process of passing over
to monopoly conditions. In that event, the exceptional
advantages of a large scale of production might be counted
on to enable a ruinous competition with smaller businesses
to be maintained.
[n providing the productive equipment for industry under
conditions of increasing returns, then, the cost of production,