186 
POLITICAL ECONOMY 
of labour could be introduced and larger 
recourse could be had to machinery, the 
additions made to expenses would at first 
fall as additions were made to the output. 
But after a time additions made to expenses 
would begin to rise because, when the business 
had reached a certain size, the slackening of 
the employer’s control, consequent upon the 
extension of the activities over which he 
had to exercise supervision, would counteract 
the possibilities of economy by way of special 
ising and the larger use of machinery. And, 
from that point onward, additions made to 
expenses would steadily rise. Our imaginary 
employer would allow his business to grow 
until the final addition made to expenses 
was equal to the price which he received for 
the product, that is until his marginal expenses 
equalled price. Let the following be the facts 
in the neighbourhood of the position of 
equilibrium :— 
Output of the 
business in tons 
per year. 
1,000 
1,001 
1,002 
1.003 
1.004 
1.005 
Aggregate cost of 
output. 
£ 
11,490 
11,502 
11,514 
11,526 
11,538 
s. d. 
0 0 
11,550 15 
Marginal cost. 
£ S. d. 
12 0 0 
12 1 0 
12 3 0 
12 5 0 
12 6 0