202 ECONOMIC PRINCIPLES

its product as before, the case reproduces the conditions of
the constant cost instance. If the output of the representative
 firm be reduced, and therefore rendered more costly to
produce, the rise in price must be sufficient to cover this loss
of economy as well as the amount of the tax.
If we are dealing with monopoly, the form of the taxation
 adopted will affect the result. A tax on the net
monopoly revenue, proportioned to its amount, will be like a
tax on rent, not capable of transference. A tax on gross
revenue, or on product, however, would afford opportunity for
readjusting the amount of product to the new conditions of
=xpenses of operation. The maximum net revenue, after the
imposition of the tax, might correspond either to a reduced
or to an enlarged scale of supply. If the supply conform to
conditions of decreasing costs, the results on price have
already been noted in discussing the case of the representative
firm. If the conditions are those of increasing costs, the new
maximum net revenue will correspond to a decreased scale
of supply, with results in price already discussed.
Connected with the subject of taxation is that of national
debts, since a government may frequently choose between
meeting expenditures by increase of present taxation or by
borrowing, Some have criticised the latter method, on the
ground that they conceive it to involve placing a burden,
both on the generation which provides the borrowed funds,
and on that which repays them. For the purpose of examining
 the case, we shall assume that the question does not
concern borrowing abroad. It is clear that the criticism
quoted cannot apply to that case.
In the case of raising funds by taxation, the existing
citizens are required to submit to sacrifice of the amount
contributed by each, and that sacrifice is definite and final.
In the case of raising funds by loan, the existing citizens
submit to the present sacrifice, but they receive a claim on
the public funds, that is, on funds contributed partly by
others than those who have lent to the state, and contributed
in different proportions from those in which the loaned funds
were provided by their lenders. If the funds raised by loan
could be secured by a levy on tax-payers, on the taxing