SUPPLY AND DEMAND 
87 
counteracted. For practical purposes, there 
fore, it is probably safer to say that supply 
prices are settled by the cost per unit of 
output of marginal firms ; remembering, 
however, that some theory of the sizes of 
businesses must be brought in to supplement 
this statement. Cost per unit of output in 
the marginal firm is, of course, less likely 
than the marginal cost of any business to 
diverge widely from the results which theory 
would lead us to expect in a frictionless 
economic system. 
We must be on our guard against making 
our working theories niggling and going to the 
extreme, so to speak, of using a razor to cut 
turf. Nevertheless it is worth while taking 
notice of a tendency even if it is overborne 
before it attains its end. Its recognition may 
enable us to account for otherwise puzzling 
swells on the surface of economic fact ; and 
more important still, perhaps, its recognition 
may enable us to detect a single law in seem 
ingly disparate causal relationships, a law 
which is none the less real because in part it 
is invariably counteracted. These considera 
tions apply to the tendency which we have 
been discussing. It is fully worth while 
knowing that a tendency exists which when 
effective renders it possible to explain value