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  specialising ­
  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