disturbed; (3) that in the case of the more primitive systems the
disturbances are soon overcome, but that they continue longer and
produce far greater effects in the case of railroads; (4) that one
important influence of this kind tends naturally to disappear, while
another continues and calls for regulation by the state; and (5) that
this regulation needs to be based on natural tendencies and to conform
to the laws which, when competition rules, govern the returns of all
classes of producers.

_A Typical Instance of Partial Monopoly in Transportation._--We may
now trace the development out of a purely competitive condition of a
simple instance of what is usually termed monopoly, though in a
rigorous use of terms it can hardly be so called. It is a monopoly the
power of which is limited. So long as goods made at A are carried to B
by some primitive method which insures the presence of competing
carriers, the returns for carrying will tend only to cover costs. By
a normal adjustment the price of the goods at A only repays the costs
of making them, and if these and the carrying charge amount to less
than the costs of making the goods at C and transporting them to B,
none of them will come to B in this latter way. Makers at A and
carriers on the route from there to B will possess the market, and the
place value which the goods acquire when taken to B will be fixed
directly by the costs of carrying.

It is when there is no effective competition on the route between A
and B, while there is free competition in making the goods both at A
and at C, and also in carrying them from C to B, that a typical case
of a partial monopoly is presented.

[Illustration:
C
|
| COMPETITIVE
| CARRYING
|
v
A------------------------------->B
MONOPOLISTIC CARRYING
]

The price of the goods at A is a definite amount fixed by competition
between producers, and the price at B is also a definite amount fixed
by competition between different makers at C and between different
carriers between C and B. The difference between these amounts sets
the limit of the charge for carrying from A to B; but in that
operation there is, for a brief period, no effective competition. For
simplicity let us say that this carrying is at