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APPENDIX

merely of abstract interest, as completing the range of
theoretic possibilities.
The preceding brief discussion of taxes was based on an
assumption of the existence of competition between producers.
 We next turn to the consideration of the problem
of monopoly. To present this problem diagrammatically,
we select the mode of representation adopted in Figs. (vi) and
(vii). In Fig. (x), the curve Op#P is the demand curve for a
commodity whose
supply curve is
OpzP. The supply
curve is drawn so
as to represent
costs exceeding
the value of the
product for small
scales of supply,
and increasing
returns both in the
earlier part of the
curve and also
near P. Let ordinates
 such as 72QM
be drawn across
the two curves,
and let MQ be
taken equal to #
the intercept on
the ordinate between
 the two curves. The line traced out by the points
Q, thus found, may be called the monopoly-profit curve. For
a supply OM the costs are M¢, while the demand price is Mr.
Thus, if a producer can control the whole supply, and restrict
it to OM, he can secure the difference MQ between his costs
and the value of the total output. As shown in Chap. V., the
object of the monopolist being assumed to be the securing of
the greatest possible net returns, we must find the volume of
supply which maximises the net return in order to have the
position to which the market tends under monopoly of
supply. Thus we need to find the greatest value of MQ, or
the highest point on the curve traced out by Q. This is
easily found. If Q be that point, the supply under monopoly
will be OM, the price being &gt; per unit.

fig, (x,