AG_ is produced. The price will then stand at the cost of
producing the article. When a monopoly is firmly established, it will
seek to get the largest net profit that can be had, and a consistent
execution of the plan would reduce the output from the amount measured
by _AG_ to that measured by _AH_. The price would then become _HE_
and the net profit the amount of the area _EB_. If wages are so raised
that the cost becomes _G'F'_, the net profit becomes _EB'_. This
profit can be increased by further reducing the product to the amount
_AH'_, putting the price at _H'E'_, and the net profit _E'B'_, which
is larger than _EB'_. If an independent producer can employ non-union
labor and create the goods at the cost _GF_, and market them without
reducing the price much below the level indicated by _H'E'_, he can
make on each unit of product a profit nearly equal to _I'E'_. This
fact makes the monopoly cautious about raising its price to the level
_H'E'_. A tribunal of arbitration may somewhat raise wages without
fearing such an increase of prices. By a crude and instinctive
judgment the court will hit upon some level of wages which falls well
within the limit of what the monopoly can pay and is above the amount
which marginal social labor gets.

[Illustration]

_The Probable Result of a Strike as a Standard for an Award._--Let us
see what would happen if a board of arbitration should abandon all
effort to level out the general inequalities in wages, and try chiefly
to end quarrels and avert long-continued strikes. With this in view it
might aim to give the men whatever they would be likely to gain by
means of the strike. In a true sense this mode of procedure is more
nearly scientific than either of the others. Any tribunal of voluntary
arbitration will aim to content both parties sufficiently to prevent
an interruption of business. The men may consent to take somewhat less
than they hope to get by a successful strike; and the employers may be
willing to pay somewhat more than they would at the end of a
successful lockout. The probable outcome of the struggle may be
differently estimated by the contending parties, and if so, an actual
struggle will end by making employers pay more and the workmen take
less than they had severally expected to do. If this amount can be
awarded at the outset and the struggle precluded, all parties will be
gainers by the continuance of business, unless the employers desire a
strike for the sake