The Effects of a Loss

Abstract

In this chapter will be considered various questions that arise when a firm’s production is carried on at a loss. The treatment of these questions will be primarily directed towards a firm producing under conditions of perfect competition, which was the subject of the last chapter; and perfect competition will throughout be an implicit assumption. But it will easily be seen that most of the conclusions are applicable in a general sort of way even when competition is not perfect. The nature of their application is usually obvious and for the sake of simplicity in exposition it will not be specified. A single example will probably suffice. It will appear that under certain conditions the prime cost curves of a firm are raised and consequently, under conditions of perfect competition, its output is reduced. But just as surely, if in a different way, the same result follows when the market is imperfect.