82 
POLITICAL ECONOMY 
outgoings equal price ; but it does not pay 
him to allow it to assume greater propor 
tions after this limit has been reached. We 
may, then, lay it down as an economic law 
that in every industry, be it agricultural, 
manufacturing, distributing or what not, the 
marginal expenses of each economic unit 
known as a business, or firm, would tend to 
equal the price of the commodity or service 
supplied. We need not trouble to enter here 
into the side complications which would have 
to be introduced into this exposition to meet 
the case of businesses producing things of 
several sorts, particularly as they raise no 
fresh theoretic issues of outstanding signi 
ficance. 
Let us go back for illustration to our 
boot-making industry and imagine that it 
comprises half a dozen firms. Let us suppose 
that it turns out in the aggregate 12,000 
pairs of boots a year, for which output the 
demand price and the cost of production 
of the marginal firm are both 14s. Then if 
the industry is in a position of perfect equili 
brium, which implies that every one of its 
constituent parts is in a position of perfect 
equilibrium, each business must be of such 
a size that its marginal expenses are 14s., and 
its total expenses are less than its marginal