SUPPLY  AND  DEMAND

85

render  the  functioning  of  the  industry  as  a
whole  not  merely  more  economical  but  more
economical  to  such  an  extent  that  the  new
marginal  cost  of  a  business  would  be  beneath  its
old  marginal  cost.  To  admit  this  qualification
is  simply  to  admit  that  industries  may  be
subject  to  increasing  returns.
The  significance  of  the  theory  of  supply  as
thus  refined  may  have  already  dawned  upon
the  reader.  It  involves  us,  as  it  now  stands,
in  the  conclusion  that  by  the  supply  price
of  a  given  output  of  an  industry  we  ought
logically  to  mean  in  highly  abstract  theory
the  marginal  expense  entailed  in  the  several
businesses  of  the  industry  when  such  an
output  is  aimed  at.  Of  course  this  marginal
expense  comes  to  the  same  thing  as  the  cost
of  the  marginal  firm  per  unit  of  output  under
the  assumed  conditions.  This  follows  as  a
corollary  from  the  above  reasoning.  Our
new  view  results  from  a  thorough  and  unreserved ­
  application  of  the  marginal  method  to
supply.  My  marginal  demand  and  the  marginal ­
  demand  of  every  other  purchaser  equally
settle  price  on  the  side  of  demand,  according
to  finished  theory.  We  have  drawn  from
industrial  experience  by  close  analysis  that
a  corresponding  assertion  can  be  made  as
regards  supply  ;  that,  according  to  strict