_The Cause of the Partial Monopoly in Carrying._--There is nothing to prevent a second schooner from being put on this route, if the returns to be expected should warrant it. At the outset the new vessel would get only about a half of the amount of traffic enjoyed by the first, and the rates would probably be reduced by the competition between the two. Until the returns of the first vessel become large it has no rivalry to fear, but it is clear that its monopoly is held by a very precarious tenure. It is not likely long to enjoy the benefit of any charges which yield much profit. The growth of traffic will in due time bring the competing vessel, and the rule of returns that only cover costs will again assert itself. The owner of the first sailing craft has been able for a time to charge "the value of the service" he has rendered, as that value was determined independently of his own action; but now this value itself depends on his action and that of rival carriers using the same route, and it adjusts itself at the level of cost. _The Effect of partly Unused Vessels for Carrying._--The case illustrates another principle which is equally general. The _entrepreneur_ whose capacity for producing is only partially utilized may often take some orders at less than it costs to fill them, as cost is usually understood, and he will still be the gainer. In manufacturing as well as in carrying there are "fixed charges"; there are costs which stand at a definite amount which is independent of the volume of traffic, while other costs increase as the volume grows. These are the "variable costs," and they have to be further classified, since some of them do not increase as rapidly as the business grows, while others increase with the same rapidity as does the business. The makers of sewing machines, typewriters, reapers, and mowers, and indeed machinery generally, can usually increase their product without correspondingly increasing their outlay. They can make goods and sell them in a foreign market at rates which would injure and might even ruin them if they were applied to the sales made in their own country. This fact is most obvious when the manufacturer's machinery is not all kept running or when it all runs only a part of the time. Increasing the output is then a particularly cheap operation. When a carrier's facilities are partially unused--when a ship carries a cargo in one direction and returns in ballast, or when it sails on both trips with its hold only half full--it is ready to carry additional goods at a low rate provided that this policy will not demoralize its existing business. In our illustration we have assumed that some merchandise is made at A and consumed at B, but it may well be that goods of some sort are produced at B and consumed at A. There may be stone quarries at B and there may be need of stone for paving or building at A, and the vessel may carry a return cargo of