and which has no competitors. If it fixes its fare at 10 cents,
very many people will prefer to walk or take some other mode of
conveyance, who, if the fare was at 5 cents, would patronize the road.
Thus it may very likely happen that 5-cent fares will yield it the
greatest net income. It is often said that it is competition which has
brought our rates of railroad transportation down to their present low
point. While this is largely true, it is also true that the tendency to
foster the growth of traffic by making a low tariff has been a large
factor in bringing rates down to a reasonable point. Another example of
this principle's operation is in the case of monopolies protected by the
patent laws. In this case the collection of only a moderate royalty will
generally result in greater profits to the inventor than he would secure
by exacting a large fee, because of the greatly increased sales in the
former case.

It should not be understood, however, that this principle has its only
application in cases similar to the two mentioned. There is hardly an
industry, monopolized or competitive, into which it does not enter to
effect important results. It is to be noted, however, that it is least
effective where the demand for the monopolized article is least
sensitive to a variation in price. This fact should be considered by
those who are fond of arguing that this principle alone is always
sufficient to prevent monopolies from doing much harm. While it is
powerful in the case of such monopolies as we have mentioned, where the
demand for the commodity furnished varies greatly with the price, in the
case of the great copper trust or of the quinine trust or of any
monopoly controlling the great staples of human consumption, it seems
plain that it can have little effect. Nor do we need to base our proof
that this principle is not a sufficient remedy upon this ground alone.
Grant it to be true that a certain monopoly makes the greatest net
profit when its rates or prices are at a certain point; then will it not
be apt to set them slightly above that point, where they will give
nearly the same profit with a considerable decrease in the volume of
business transacted and in the corresponding labor and responsibility?
And, again, the point where it makes the greatest net profit is
considerably above the point where it is of the greatest possible
benefit to the community at large. This latter end is attained when it
uses its facilities