A Digression on the Four Cost Curves

Abstract

THE next task to which our technique may be applied is to make the comparison between competitive and monopoly output: that is to say, to contrast the output of an industry when it is composed of a number of independent producers, with the output of the same industry in the same conditions of demand when it is controlled by a single authority. We have already discussed the competitive supply curve, and we know that competitive output is the output at which demand price is equal to supply price. But the cost curve which governs monopoly output may obviously be something different from the supply curve which governs competitive output, and we cannot embark upon the comparison between monopoly and competitive output until we have examined this question more closely. The present chapter therefore is devoted to a digression on cost curves.