Cost as a Factor in Supply
In a purely competitive market, the supplier of goods and services has no control over the market price, because he produces too little to influence market conditions. With no difference between his products and the products 1 his competitors, he will sell nothing if he charges above the market price and he will sell all if he charges at or 2 the market price. However, in considering the price, he must take the 3 of production into consideration. There are times when he may be willing to sell below his cost. This might happen when prices tumble for 4 he believes will be a short time. However, no business person can 5 to lose money for a prolonged period. He must be constantly 6 of his costs in relation to the market price if he is to compete successfully and earn a profit.
Many people have the impression that as production increases, costs per unit decrease. 7 mass production has made this true in certain industries and at certain levels of production, 8 logic and practical experiences have shown that costs per unit begin to rise beyond a certain level of production. Some economists 9 to this principle as the law of increasing costs.
The reason costs rise as production goes up is 10 . However, it is easy to recognize that as production goes up, the need for additional factors of production will also grow, 11 competitive bidding in the marketplace for the factors of production. If a producer needs 12 skilled labor to produce more, and none of this labor is unemployed, the producer will have to get 13 from other sources. This can be done by 14 higher wages. Higher bidding would also apply to the other factors of production. We must also recognize that not all labor is equally productive, 15 not all land is equally fertile and not all ore (矿石) is equally rich in the mineral wanted. Cost as a Factor in Supply