In a purely competitive market, the supplier of goods and services has no control over the market price, because he produces too

In a purely competitive market, the supplier of goods and services has no control over the market price, because he produces too little to influence market conditions. With no difference between his products and the products of his competitors, he will sell nothing if he charges above the market price and he will sell all if he charges at or below the market price. However, in thinking over the price, he must take the cost of production into consideration and no business person can afford to lose money for a prolonged period. He must be constantly aware of his costs in relation to the market price if he is to competes successfully and earn a profit. Many people have the impression that as production increases, costs per unit decrease. While mass production has made this true in certain industries and at certain levels of production, both logic and practical experiences have shown that costs per unit begin to rise beyond a certain level of production. Some economists refer to this principle as the law of increasing costs. The reason costs rise as production goes up is complex. However, it is easy to recognize that as production goes up, the need for additional factors of production will also grow, resulting in competitive bidding in the marketplace for the factors of production. If a producer needs more skilled labor to produce more, and none of this labor is unemployed, the producer will have to get it from other sources. Therefore, offering higher, wages is the only way to encourage all labor to be equally productive.