ABSTRACT
§ 1. Neither marginal costs nor marginal expenses can afford an explanation of rates of exchange for goods. —§ 2. The ‘marginal’ determination is based on a false imputation of separate costs to different parts of a supply. Neither theory nor business practice supports this separation. Normal, not marginal, expenses determine supply prices. Productive power tends to flow into the most efficient business type, and the expenses of this normal business regulate prices. This holds both of manufacture and of agriculture. —§ 3. In any given market mean expenses govern prices. The same analysis applies to demand prices: mean, not marginal, utility determines them. Selling prices are the equilibrium of mean expenses and mean utility, as expressed through demand.
