PRINCIPLES OF VALUE AND PRICE 435 



and increasing returns. No portion of the supply continues to be pro- 

 duced at a cost different from the marginal cost. With the supply 

 OB, for example, the cost per unit of the commodity is BP' for each 

 and every producer. If for any reason the supply should be reduced, 

 cost for each unit would be greater. Suppose, for example, that 

 demand should decline, the demand curve shifting to the left, to dd', 

 so as to intersect the supply curve at A'. The quantity normally 

 supplied would then be OA, selling at the price A A'. All producers 

 would find their cost per unit higher than when the quantity supplied 

 was OB; for A A ' is greater than BP'. But at neither price would 

 there be differences between producers. Total cost and total selling 

 value in either case would be represented by parallelograms; at the 

 price A A' by the area OAA'C, and at the price BP' by the area OPP'B. 

 There is no such phenomenon as surplus gain to any producer. 



This case differs, again, from that considered previously. There 

 the effect of a general lowering of the supply schedule was con- 

 sidered, on the supposition that the reduction was due to some 

 extraneous cause not directly connected with increase in supply. 

 Here the reduction is supposed to be chiefly due to such an increase: 

 the mere fact of greater supply brings a decline in cost per unit of 

 supply. Cost, uniform for all producers, becomes less for each as 

 more is produced. 



All these three cases, on the other hand, are alike, in that long-run 

 results are considered. Uniformity of costs, and the automatic decline 

 in cost for all producers, with increasing supply, never are found in 

 industry. Where the conditions are favorable for a general decline 

 in cost, some producers, as we have seen, take advantage of them more 

 promptly than others; and so long as this "dynamic" situation con- 

 tinues we have a lowering of cost for some producers, but not for all. 

 This situation, however, will not endure ; those who do not avail them- 

 selves of the improvements are underbid and driven from the market, 

 and the "static" state of uniform cost is approached. The case 

 would be different if those who had the better facilities were not sub- 

 ject to competition from others on even terms, and could not them- 

 selves increase their output indefinitely at lower cost. With such a 

 limitation to their advantages, we should have precisely the case of 

 varying costs, as previously discussed. Here cost is supposed to be 

 uniform, but not constant it becomes less per unit as the number 

 of units increases. The long-run result is an interaction of demand 

 and supply; both blades of the scissors are cutting. 



