64

POLITICAL  ECONOMY

the  cost  of  production  of  one  firm  will  be  identical ­
  with  that  of  another,  because  all  employers
do  not  possess  the  same  ability  and  application, ­
  workmen  are  not  indistinguishable  from
one  another  in  respect  of  capacity,  and  there
are  differences  as  regards  productive  value
between  the  several  units  of  other  agents  in
production.  The  business  which  has  the
misfortune  to  function  with  the  highest  cost
of  production  is  known,  as  we  have  seen,  as
the  marginal  business,  or  business  of  marginal
quality.
With  a  view  to  trimming  the  ragged  edges  of
our  ideas,  let  us  take  a  particular  case.  Let
us  imagine  an  industry  engaged  in  the  manufacture ­
  of  some  kind  of  braid.  Let  there  be
four  firms,  A,  B,  C,  D,  and  let  their  costs
of  production  per  yard  of  braid  be  6d.,  7d.,
6&d.,  and  6|d.  respectively.  Then  B  is  called
the  marginal  firm  because  it  has  the  highest
cost  of  production,  namely,  7d.  Let  us
imagine  that  the  output  of  the  four  firms  taken
together  is  100,000  yards  of  braid  per  year
Then,  if  100,000  yards  are  to  be  sold,  the
price  must  be  at  least  7d.,  because,  if  it  were
not,  it  would  not  pay  the  firm  B  to  produce.
In  its  cost  of  production  of  7d.  we  have  included ­
  adequate  remuneration  for  all  the
factors  in  production,  including  the  employer.