It is a matter of some interest to define as exactly as possible the relation of potentiality cost to entrepreneur’s cost. When an entrepreneur, in making his product, uses a production good capable of other applications, by other entrepreneurs, his product is made at the expense of potentiality cost. Whether in the isolated or in the social economy, there is waste whenever a good is produced at a potentiality cost which is higher than the value of the good itself. A greater value will be sacrificed to obtain a less. In the isolated economy Crusoe will easily guard himself against this form of waste. In the social economy, the competition of entrepreneurs for the supplies of production goods prevents the same form of waste. Competition being granted, nowhere will there be found an entrepreneur who uses up production goods to make a value less than the highest value that these goods could produce elsewhere. For otherwise the entrepreneurs located at the other points of higher return would be able to command the production good for their purposes, and the possibility of profits would furnish them with the motive to bid for it. If entrepreneurs’ costs always consisted solely in the value of production goods capable of manifold applications, we could say that the potentiality cost of a product determined its entrepreneur’s cost. For the former cost consists in the highest other values that these production goods may be made to produce elsewhere, and the entrepreneur will normally have to pay that value for them and no more. His necessary outlay for a product is thus regulated by its potentiality cost.