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cost of operating when completed, but may not pay interest on the $5,000. The well may still be operated if it pays enough to make it more profitable to operate it than to sell or take to some other place the material that can be removed. The cost of drilling will then be charged to profit and loss. Whether the well is operated or not, depends upon the ability of the owners to sustain the loss involved. All specialized plants, that is, those which cannot be used except for one purpose, are like the example given, and the marginal plant may not pay all the costs of production. Plants below the margin may be operated in other industries for a time, with the hope of better results or a rise in the market, but in the long run plants below the margin must succumb. Restatement of the Law of Value.—Market value is the value at any one time in a market and it is fixed by the interplay of demand and supply. Normal value is determined by the cost of production at the marginal plant, and, since most goods are made to be sold and not for the use of the manufacturers, market value and normal value tend to be uniform, though there may be temporary fluctuations of market value both below and above the cost of production. It should, however, be borne in mind that this is not true of monopoly goods. which are considered in another chapter. Summary.—A market is a place where sales are made. Markets may be local or general. Increased means of transportation tends to make markets general for goods which will bear transportation. The price of wheat, corn, cotton, and tobacco tends to be fixed by a world demand and supply. A shortage of the wheat crop in India or the Argentine Republic influences prices in Liverpool and Chicago. For perishable articles the markets are more local. The price of strawberries in Detroit may differ from the price in Cleveland by more than the cost of transportation from the one city to the other, if the berries will not stand transportation without spoiling. Prices in a market are fixed by demand and supply. An elastic demand is one which changes rapidly with price; an inelastic demand remains about the same regardless of price. For most articles there are substitutes and these have an important bearing on price. Value in use is value to the person who may use the article; value in exchange is what the article will bring on the market. Subjective value is another term for value in use. Price is value expressed in terms of money. Market value depends upon supply and demand. Normal value is measured by the cost of production of the marginal producer.

TOPICS FOR DISCUSSION, DEBATE, AND SPECIAL REPORTS

I. Make a list of articles for which the demand in your community is inelastic. 2. To what extent are substitutes used in your community? 3. Give some examples of differences in subjective values of the same commodity by different persons in your community. 4. Give some examples of differences in price for the same article in your city. Show the relation between market value and cost of production of wheat, clothing, and furniture. 6. Titian's portrait of Giorgio Cornaro was sold to New York dealers in 1921 for $300,ooo. This was paid because the dealers thought it was worth that much as an investment.

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What would be its subjective value to a person who had never heard of Titian? Chinese art collector saw a rare vase in a Brooklyn secondhand store and purchased it for five dollars. The next day he sold it for $1,800. The subjective value to the secondhand dealer was less than five dollars, but to an admirer of Chinese vases its subjective value was more than $1,800. As a matter of ethics, should the purchaser have informed the second-hand dealer concerning the market value of the vase?

CHAPTER IX

THE ORGANIZATION OF INDUSTRY

The Entrepreneur.—Land, labor, and capital must work together for the production of wealth. In agriculture in the United States this co-operation is generally brought about by the owner of the land. He hires what labor he needs, in addition to that which he himself can supply, owns the farm machinery and determines how the land shall be used and manages the business. He is landlord, capitalist, laborer, and manager. Likewise in small manufacturing plants and retail stores, the organizer of an industry not infrequently owns the land and capital and supplies part of the labor. In larger business enterprises more often the directing of business is given to a special class of professional men. These managers of business were once called undertakers, but since that term has now been assumed by one class of professional men, we usually call the manager of business by the French term entrepreneur.

The entrepreneur organizes and directs business, whether himself a part owner or not. The entrepreneur is sometimes called a captain of industry and this is appropriate because he commands the industrial forces. The success or failure of a business depends chiefly upon him.

Individual Proprietorship.–The simplest form of business organization is that of a single proprietor who is

his own entrepreneur. He owns or borrows the capital,

secures the land, hires the laborers, and manages the business. No formal documents, no organization taxes or other preliminaries are required by law in this type of organization. The proprietor is responsible for all debts and to him belong all profits. For example, should you desire to engage in the grocery business, the method of procedure is very simple. Hire a suitable store, purchase supplies, and open your shop for business. But be sure that you have ability as an entrepreneur, because upon this more than anything else depends success. Partnerships.-A partnership is the association of two or more persons in a business enterprise. The enterprise in this form of organization is owned jointly and each partner has equal rights and responsibilities unless otherwise stated in the articles of partnership. The terms of partnership, such as the sharing of profits and losses, are stated in a legal document. In an ordinary partnership each partner is liable for a debt contracted by any partner, if it was contracted for the benefit of the business. His whole private fortune may be taken to satisfy such a debt, even if it was incurred without his knowledge. Another serious disadvantage of a partnership is that death, or the bankruptcy of a partner, dissolves the partnership. Any dissatisfied partner may also cause a partnership to come to an end. So long as the partnership satisfies all, it works well, but a little friction may be fatal. It is no wonder that a partnership has long been called “a poor sort of ship.” Limited Partnerships.--To overcome some of the disadvantages of a general partnership, limited partnerships

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